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Eurusdidea

EURUSDThe euro fell rather hard on Wednesday to reach the 1.05 area. This is an area where we have seen a lot of action in previously, and it is a large, round, psychologically significant figure. The 1.05 level would cause a lot of headline noise, and we have bounced well over 60 pips from that area. Because of this, I think it is probably only a matter of time before we have to bounce after this massive selloff. This being said, I do not want to buy the euro. In fact, I think that any significant rally you see at this point should end up being a nice opportunity to short this market yet again. The 1.08 level above should act as a bit of a ceiling in the market, and then we have the 50-day EMA which is rapidly approaching the 1.0933 level, an area where we had seen previous resistance as well. Whether or not we can break down below the 1.05 level is a completely different question, but it certainly would not be surprising at this point. A rally at this juncture will more than likely continue to attract sellers given enough time due to the fact that the overall momentum of the market has been so negative. The Federal Reserve continues to be very hawkish with its statements, and as a result, the market will have to deal with the idea of higher interest rates in the United States. On the other side of the Atlantic Ocean, we have the European Central Bank which is stuck in a situation where they cannot raise interest rates very rapidly because although there is inflation and there are energy concerns. An economy that does not have energy is not an economy that is going to grow very much. Currently, I believe this pair is oversold and a bounce is almost certain. The bounce should be a nice opportunity so I am going to step out of the way and perhaps try to pick up “cheap dollars” at higher levels. Expect choppy volatility, but that has been the way this pair has traded for several months now anyway, so it should not be a huge surprise at this point. The fact that we bounced as hard as we did does suggest that we are ready to turn around for the short term.
by SmoothJB
EURUSDThe euro continues to get punished, and I think at this point we are getting ready to attempt to break down below the 1.08 level. Having said that, there is a significant amount of support here, so a short-term rally is almost certain to happen. Nonetheless, this should end up being a nice shorting opportunity and at this point, I have no interest in trying to buy this market. Keep in mind that the area below 1.08 is very noisy, so the drive down to the 1.06 level will more than likely be more of a grind than any type of freefall unless headline shocks cross the wires.
Short
by SmoothJB
1
EURUSDhe Euro initially tried to rally during the trading session on Thursday, but then fell rather hard to pierce the 1.08 level. This was a major breach of support, although we did recover a bit after that move. This tells me that there is still plenty of downward pressure on the Euro, and during the day we also learned that the EU considers paying for Russian natural gas in rubles as a breach of sanctions. Because of this, the energy question continues to be very difficult for Europe, and I think that might be something that we see in the currency markets. Furthermore, the interest rate differential between Germany and the United States continues to widen, and therefore it will continue to favor the greenback. While the ECB has the added headache of having to deal with expensive energy, or perhaps even the possibility of very little energy, the Federal Reserve is extraordinarily tight and is looking to hike rates quite rapidly. With that being the case, it does make a lot of sense that the greenback will continue to overcome the Euro in strength. The 50 Day EMA has broken below the 1.11 level and is sinking rapidly. I think you use that as the “ceiling in the market” on any type of significant bounce. I do not see that bounce happening, but of course, anything is possible. At this point, if we break down below the bottom of the candlestick from the Thursday session, it is likely that we could go looking to reach the 1.06 level underneath, which is an area where we had seen a lot of noisy behavior previously, therefore, I anticipate that a break down is going to be a slow and painful event. At this point, I cannot see a legitimate reason to buy the Euro over the greenback, but if we were to break above the 1.12 level, I might consider it. Needless to say, as it is 400 points above, it is not something I am overly concerned about doing anytime soon. If we were to do that, it would more than likely be a trend change, which tends to be a longer-term event anyway. In other words, if you are looking to buy the Euro you can take your time, as you should have plenty of it to spare.
Short
by SmoothJB