The euro went back and forth on Wednesday as the 1.05 level continues to offer a lot of support. This is a pair that has nowhere to be, so it is not really worth trading. The 1.06 level above does offer a little bit of resistance so if you are willing to stick to scalping, you may be able to trade this market between those two levels. However, if you are not able to sit in front of the computer at all times, it is difficult to imagine much of a setup.
If we do break above the 1.06 level, then I think the prudent thing is to wait for an opportunity to start shorting again. I would like to see a lot of exhaustion near the 1.08 level that I can take advantage of, as it is not only previous support, but it should have a certain amount of interest in that area due to the 50-day EMA. In general, this is a market that I think will continue to see a lot of downward pressure as the Eurozone struggles with almost everything at this point.
CPI numbers came out hotter than anticipated in the United States on Wednesday so that certainly suggests that the Federal Reserve is going to continue to be rather tight with its monetary policy, which will have the US dollar rising overall. Yields in America continue to rise, as the yields in Germany and other major European Union countries continue to offer almost no return, or in some cases offer negative returns. As long as that is going to be the case, it makes much more sense to own the greenback than it does to own the euro. Granted, there will be the occasional bounce, but that is to be sold into. In fact, I do not have a scenario in which I would be willing to buy this market as things stand right now.
To the downside, we have the area below the 1.05 level offering a lot of noise, that extends down to the 1.03 level. There is a lot of previous action in that general vicinity, so I think if we do break down, it will be more or less be a grind lower more than anything else.
