Bounces From Major Support Level

The Euro has bounced from a major support level to show signs of life yet again. By doing so, the market looks as if it is ready to try to recover, but there are a lot of noisy areas above that could cause problems.


When I look at this chart, it’s obvious that the 1.04 level is supported, but I would also point out that the 1.06 level is likely to be significant resistance. Furthermore, the 50 Day EMA is just above there and is falling, so that should offer a bit of dynamic resistance as well. In that scenario, I fully anticipate that the market will continue to find a lot of noise between the two levels, as we try to sort out whether or not the Euro can save itself. I am of the camp that I do not believe it will.

The Federal Reserve is going to continue to tighten monetary conditions, which of course strengthens the US dollar overall. Furthermore, we have to keep in mind that the overall trend is to the downside, in trends in the Forex market don’t change very often. You continue to fade rallies in this market, you continue to get paid. The 1.04 level is stubborn, but you could have said the same thing about the 1.12 level, and perhaps even the 1.08 level.

The ECB is going to tighten its monetary policy, but it is so far behind the curve in relation to the US central bank that the trajectory still remains lower. Furthermore, if we are going to get a bit of a global slowdown, the US dollar suddenly becomes much more desirable, because it becomes a “safety asset.”

If we do break above the 1.06 level, then I think the 1.08 level is going to be very difficult to break above. Quite frankly, I think this is the type of market where you look for a rally that you can fade. That’s probably what I will be doing as I close the book this weekend, but I would like to see some type of exhaustion that I could start selling into. If we do break down below the 1.04 level, then the 1.02 level is targeted, followed by the parity level. That being said, the Euro is almost always choppy.


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Your email address will not be published.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.