Potential signal:
- I am selling here.
- I am putting a stop loss at 1.1660 and targeting 1.14 below.
The euro continues to weaken as sellers defend the 50-day EMA, with downside targets near 1.14 and possibly 1.11. Ongoing economic malaise and emerging liquidity concerns favor renewed US dollar strength, keeping rallies vulnerable to fading.
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The euro fell during trading on Monday as we continue to see overhang in pressure in this market. The 50-day EMA continues to be a bit like a downtrend line, and of course, we've seen more selling pressure jump into the market every time we approach it. Keep in mind that the euro has fallen from its highs, which happened to be during the FOMC press conference in September.
It looks to me a lot like the euro is probably going to go looking to the 1.14 level, which is a large, round, psychologically significant figure, but more importantly, it's an area that has been both support and resistance multiple times. So, I think there's a certain amount of market memory. The 200-day EMA is still sitting in that same area, so I think we've got a situation where traders are probably looking at that as a nice juicy target.
On the Breakdown
If we were to break down below there, then you could see the market really start to drop, perhaps down to the 1.11 level. And it wouldn't surprise me to see that play out due to the fact that, of course, the economic malaise in the European Union, and if we get economic malaise in the United States, that actually is good for the US dollar as people go running toward it. There is a bit of a liquidity crisis starting to brew under the surface from everything that I'm seeing. And if that ends up being the case, the US dollar comes into demand, and it starts to strengthen quite drastically.
Ultimately, I think this is still a situation where you are fading short-term rallies with signs of exhaustion. And I don't really like buying, at least not until we break above the 1.18 level, which, at that point, then I think you have a bigger move to the upside, but you would probably see that in congruence with the US dollar falling against multiple other currencies.
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