- During trading on Tuesday, we have seen the US dollar strengthen a bit against the euro, which makes a certain amount of sense considering that we are at a major inflection point in this pair.
- The 1.05 level is always going to be a bit difficult for traders to break above.
- And at this point in time, it is showing its resilience as resistance.
That being said, I think there is a significant amount of resistance on the way into the 1.06 level above, and therefore we need to be very cautious about trying to get bullish on this EUR/USD pair just yet. If we break down below the 50 day EMA on a daily close, I do think that we will probably revisit the overall consolidation. This is a departure from recent action, as we had seen nothing but bullish action, but now it looks like we are starting to get a little overextended.
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This is a scenario where I think you're looking for cheap US dollars and you might be getting them right now. The next couple of days should be important and it could give us an idea as to where we might go over the longer term.
Still Don’t Believe the Euro
At this point though, I'm not interested in buying the euro until we break above the 1.06 level, so I look at this with skepticism still, and I think that probably will continue to be the case going forward. The most obvious answer for me is to assume that we are still very much in consolidation, with 1.05 being the resistance area, and the 1.02 level underneath being massive support. This has been a nice rally, but when you look at the totality of the move, it really hasn't changed much. It just looks like we're flailing around and looking for some type of directionality.
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