The euro went back and forth on Tuesday, showing a real hesitation as to where we are going to go next. That being said, it should not be a huge surprise, especially considering that we are basically dead in the middle of the larger consolidation area. That consolidation area, which sees the 1.1375 level as resistance and the 1.1225 level underneath as support, has been very important over the last couple of months.
Keep in mind that this week also has the non-farm payroll announcement coming out on Friday, so that will obviously have a certain amount of influence on the greenback itself. While many other currencies are starting to see a move against the greenback, the euro itself is sitting sideways, which is quite telling as to how weak the common currency is at the moment. As we are sitting at the 1.1293 level, we are essentially right in the middle of the range and it looks as if going back and forth is more than likely going to be the normal attitude of things until we get some type of bigger catalyst.
The candlestick for the trading session on Tuesday shows confusion, and I think that makes the most sense anyway. As we are dead in the middle of this consolidation area, there should be a certain amount of “push/pull” coming into the picture. Keep in mind that this pair is somewhat risk appetite sensitive, but not as much as many of the other major pairs. The US dollar itself will be worth paying attention to, because if we continue to see strength in the greenback, perhaps due to rising interest rates, then that will put even more downward pressure on this pair.
It is not until we break out of this consolidation area that I would put money to work though, as in the meantime it is just simply back and forth chop. However, if you are a short-term trader, you may be attracted to this type of action, because at least we have a major support and resistance barrier to deal with at this point in time. As long as we stay in that range, you have boundaries that you can work with. Regardless, I would not be aggressive with my position size, at least not until we get the jobs report out of the way.
