Euro Continues to Drift Lower

The attitude of markets has been fickle at best, so you need to be nimble and make sure that you have your trades sized appropriately.

The euro fell after initially trying to rally on Wednesday, as we continue to see plenty of downward pressure. The euro is suffering at the hands of interest rate differentials between Germany and the United States. Furthermore, the European Central Bank is very unlikely to see a reason to tighten monetary policy anytime soon, so I think this trend will continue.

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The market has been in a downtrend for quite some time, and it is very likely that we will continue to see selling pressure on short-term rallies. The 50-day EMA is currently at the 1.1115 level and drifting lower. I think at this point it is only a matter of time before we see the 50-day EMA come into the picture and cause a bit of downward pressure. This is a market that I think will see plenty of reasons for the fall, but the 1.08 level underneath is an area that should be supported based on the recent bounce and the fact that it is at the top of the overall consolidation range.

We are getting a bit of an overextended condition here, so do not be surprised at all to see a bit of a bounce given enough time. In fact, early during the day, it looked like we were ready to do that. Looking at this chart, it is very likely that we will continue to bounce around between the 1.08 level underneath, and the 1.12 level on the top. I have no interest in buying this market, as the market is so negative. In fact, is not until we break above the 1.12 level that I would consider buying this market, and we would also have to see a complete turnaround in the attitude of the US dollar around the world.

The market will continue to be very noisy, but I would look at any bounce at this point as a potential value when it comes to purchasing the US dollar. With the FOMC minutes suggesting that the Federal Reserve was much more hawkish than originally thought, we should continue to see plenty of US dollar strength over the longer term. Nonetheless, the attitude of markets has been fickle at best, so you need to be nimble and make sure that you have your trades sized appropriately.