- The euro has spent a bulk of November chopping back and forth, but overall, it's been a situation where every time we get a bit of a rally, the sellers return and start pushing to the downside.
- The euro is still somewhat of a consolidation area, but it does also look as if it's trying to form some type of rounded top.
- That would make a certain amount of sense because from a day-to-day basis, it looks like the markets are changing attitudes on the idea of the Federal Reserve cutting rates.
- The swing has been wowed in both directions, expecting cuts and then suspecting that we aren't getting cuts, and it will continue to make this a very volatile pair.
Key Technical Levels and Volatility
All things being equal, the question is whether or not we can break above the 1.17 level, because if we can, then I think it opens up the 1.18 level, which, breaking above there, would be a very bullish turn of events. Breaking down below the 1.14 level would open up quite a bit of selling pressure and perhaps move down to the 1.11 level. It's worth noting that the 50-week EMA is sitting at the 1.14 level as well, so it does suggest that we should see a lot of support there.
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The only thing I think you can probably count on in the month of December is a lot of choppy behavior, but I could probably say that about most markets. The US dollar index has been threatening a severe breakout to the upside against the 100 level, and if it does, in fact, do that, you will see the euro fall as it is such a huge part of the US dollar index anyway.
Ultimately, I do think you have more or less a fade-the-rally type of scenario setting up. But again, if we can clear that 1.17 level, then it could open up a bigger move. That being said, if we break down below that aforementioned 1.14 level, the trap door opens, and I think we accelerate to the downside, which you would see the US dollar strengthening against everything, not just the euro, in that scenario.
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