Euro Hits Large Support Barrier

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 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.


Leave a Reply

Your email address will not be published. Required fields are marked *

Risk warning: Trading in Contracts for Difference (‘CFDs’) carries a high level of risk and can result in the loss of all your investment. As such, CFDs may not be appropriate for all investors. You should not invest money that you cannot afford to lose. Before deciding to trade, you should become aware of all the risks associated with CFD trading, and seek advice from an independent and suitably licensed financial advisor. Under no circumstances shall we have any liability to any person or entity for (a) any loss or damage in whole or part caused by, resulting from, or relating to any transactions related to CFDs or (b) any direct, indirect, special, consequential or incidental damages whatsoever. For more information about the risks associated with trading CFDs please find and read our ‘Product Disclosure’.

Please recognize that this website is the only official website, please do not enter other clone websites through Internet search or advertisements.

© 2011 - 2023 All Rights Reserved.