- The Euro rallied slightly during the trading session on Tuesday as we continue to pay close attention to the 0.85 level.
- This is an area that on longer term charts, of course, has been very important.
- This is an area that I think a lot of people will be paying close attention to when you look at the longer term historical trends of this market. It'll be interesting to see whether or not we do break down, but it certainly looks like there is a lot of downward pressure.
A Potentially Important Setup
This could set up a very interesting setup and trade because if we can break above the highs of the last couple of days, that could really be a sign of strength. On the other hand, if we break down below the 0.8460 level, then it's likely that we could continue to go much lower. Both of these currencies are somewhat interchangeable at times, but what we are looking at right now is that the European Central Bank may be looking to cut rates in June. And that, of course, has people thinking that perhaps the euro will lose a bit of its strength. However, when you look at the longer term chart, we could drop all the way down to 0.84 and then 0.8350 if we do in fact slice through the support level that we had seen.
On the other hand, if we can break above the 0.8533 level, then it opens up the possibility of a move to the 0.86 level where the 200-day EMA currently sits and could offer a little bit of technical resistance. The question now isn't so much as to what do we do for a bigger move? It's do we stay in this consolidation area or do we not? I do believe that we will make a decision that could be quite profitable for traders that they take their time and wait to see whether or not the euro can hold its ground, or if it goes plunging too much lower levels.