The EUR/USD pair fell again on Tuesday, as we have broken below the 1.18 level. This is a market that seems to be rather negative, after the German elections showed just how divided the European Union is. Because of this, I think that we continue to see selling of rallies, and that we will probably go looking for support underneath, first of the 1.1750 level, and then eventually the 1.17 level where think there is much more substantial support. If we were to break down below there, then I think we go testing the 1.15 level under that, which should be even more supportive. Certainly, the attitude of the market has changed overall, and I believe that we will continue to see volatility. The US dollar could continue to strengthen, if there is uncertainty. There are pundits out there who are suggesting that the US Dollar Index has bottomed, which should put bearish pressure on this market. However, based upon the recent breakout above the 1.15 level, the technical signal is that we should go to the 1.25 handle.
Short-term negativity
I believe most of the negativity is probably short-term, but it certainly is strong. Alternately though, if we do break down below the 1.15 level, I think that destroys the narrative of the consolidation being broken and sending this market to the 1.25 handle. At that point, we may go looking to fill the gap below, somewhere near the 1.08 handle. That would in fact be a very negative turn of events for the EUR. I’m not ready to say that’s going to happen yet, but certainly the last couple of sessions have been rather brutal. At this point, I think selling rallies will be the way, unless we managed to break above the 1.19 level.
Written by FX Empire