What I believe a trader needs more than anything else is patience right now.
The euro rallied a bit on Tuesday to reach the 50-day EMA. The 50-day EMA is an area where a certain amount of technical interest will be paid, but at this point, I think the 1.08 level above is where the sellers will more likely than not reemerge. When you look at this chart, it’s easy to see that the 1.08 level was important more than once, so it does make sense that a certain amount of “market memory” comes into the picture. The 1.08 level was massive support more than once, and the scene of a big breakdown.
Underneath, the 1.04 level was where we had bounced from previously, so one would think that it will be a target given enough time. That being said, it’s obviously an area that people will pay close attention to, so if we were to break it down below there, it’s likely that the euro would go much lower. The rally has been a bit overdone, so it will be looking to fade the euro given enough time.
The European Central Bank is supposed to be on the path to raising interest rates by 25 basis points, but that is hardly comparable to what’s going on with the Federal Reserve. Because of this, it’s only a matter of time before we see that the interest rate differential will continue to bring downward pressure. Signs of exhaustion will be jumped upon from what I can see, and it’s not until we break above the 1.09 level that I would consider all of that being chewed through. Because of this, I think it’s only a matter of time, maybe in the next day or two, before we get a nice opportunity to shorten from a bigger move. That being said, if we were to break out of the upside, the euro has a long way to go before it changes the overall attitude of the market, so at this point, I think we need to see opportunities play out so that we can follow the longer-term trend. Signs of exhaustion continue to be what I wait for. I have not had one, so what I believe a trader needs more than anything else is patience right now. I plan on starting out slow, and then adding as a breakdown works out for me.