The EUR/USD pair tried to rally during the day on Wednesday, but found quite a bit of resistance above the 1.0750 level. The 100-exponential moving average has acted as resistance, and if we can close with a shooting star, the market could end up rolling over again. If we can break down below the 1.07 level, I feel that the Euro will continue to fall. We are most certainly at a very resistive area, and although I would favor selling on a breakdown, I am the first person to admit that a break above the top of the shooting star and the moving average would be a very bullish sign and could send the market towards the 1.10 level above. However, a breakdown jives quite nicely with a longer-term downtrend that we have been in. On top of that, you have to keep in mind that the Federal Reserve looks likely to raise interest rate several times over the year, and that of course will favor the US dollar.
However, I don’t worry about “why”, I worry more about “what.” And what I mean by that is the market should continue to do what it wants. It never does what it “should.” Yes, sometimes fundamental analysis helps, but other times it is completely ignored. I can make a strong argument for oil markets to be much lower than they are right now, and longer-term that will probably happen. However, the rest of the market hasn’t been paying much attention to my opinion. You have to keep that in mind when you trade currencies, in this is a classic example of that. Yes, I’m much more comfortable shorting, but at the end of the day if we break above the highs that we made over the last couple of days, that means that we are going higher. Do not over complicate it.
If we breakdown, I believe we will eventually reach towards the 1.05 level, but it is going to take quite some time to get there. While I believe that could happen, I also recognize that there will more than likely be several selling opportunities on breakdown.
Written by FX Empire