The euro plunged yet again on Monday to slice below the 1.14 level. The 1.14 level is an area that caused a little bit of headline noise, but it was when we broke down below the 1.15 level that things started to fall apart. The size of the candlestick is rather negative, as we are not only forming a long candle, but we have closed towards the bottom of the overall range. This typically means that we are going to get a bit of follow-through, just as we have seen last week.
At this point, the market still looks as if it wants to go looking towards the 1.1250 level, and I am looking for selling opportunities on signs of exhaustion. The 1.15 level above would be a significant, psychologically important figure, so if we break above there, it is likely that we would see an attempt to get to the 1.16 level. The 1.16 level above is where we had started to fall apart from, so as long as we stay below there, then I think we will eventually see selling pressure. The 50-day EMA is reaching towards it as well, and as a result it should offer quite a bit of a barrier.
We are in a downtrend, and that is probably the most important thing to pay attention to. Furthermore, interest rates in the United States continue to rise while the Federal Reserve is going to taper over the next several months. Ultimately, the European Central Bank looks to be light years from tightening, and it is likely what we see here is a differential between the two central banks being expressed on the price chart. At this point, I am simply looking for an opportunity to short this market on signs of exhaustion and short-term bounces. When you look across the Forex world, you can see that the US dollar has been at least holding its own against most currencies and strengthening against most of its major peers. I think that probably is going to continue to be the story this week, as it looks like the world is finally pricing in the fact that we are starting to slow down economically.
