The Euro rallied a bit during the trading session on Thursday, as we are approaching the US/China trade relations negotiations. If this market is doing anything at this point, I would consider it to be consolidating. We have seen a lot of noise in the financial markets as of late, and while the pair may not be driven solely due to the US/China situation, right now that’s the only game in town. This is basically going to be a “risk on/risk off situation”, meaning that the US dollar will pick up strength if there is a lot of fear in the marketplace. That could happen on Friday. The best way to think about Friday session is going to be one that is very much like an FOMC Meeting, but we don’t know exactly what time it happens. All things being equal though, if we stay below the red 50 day EMA I suspect that we will probably continue to drift lower more than anything else.
According to the technical indicators of the EUR / USD on the daily chart, the price reached stable saturation areas below the 1.1200 support level. A bearish consolidation zone is warning that the correction will be near, but the rebound will depend on the return of confidence in the EUR again. The single European currency is negatively affected by the continued slowdown of the Euro-zone economy under global trade wars. The European Union has again lowered its forecast for economic growth in the euro zone this year and next year, as uncertainty due to global trade disputes and the weakening of the auto industry continues to hinder production. The European Commission cut its growth forecast this year in 19 countries using the euro to 1.2% from 1.3% in its previous forecast in February. Growth projections for 2020 were reduced to 1.5% from 1.6%. At the same time, they said domestic demand continued to improve in Europe for the seventh year in a row.
The Euro initially tried to rally during trading on Wednesday, breaking above the 1.12 level at one point. However, the level has offered a bit of resiliency again, which is something that we have seen for several days in a row. This is the beginning of the previous support so it makes sense that it should be resistance now. I don’t think that the Euro will pick up any serious traction until we can get above the 50 day EMA which is in red on the chart. If we get that move, then we could very well go quite a bit higher. However, more likely the case is going to be that we roll over from here and go looking towards 1.1150 level, possibly even the 1.11 level.
The Euro has been very volatile as of late, as we continue to chop around a major level. The 1.12 level of course is crucial, so if we can continue to see this level offer significant interest in the market, we will continue to see a lot of back-and-forth. Looking at this chart, it looks very likely that we will continue to see sellers every time it rallies. However, there is a significant amount of support underneath at the 1.11 handle, so I don’t think it’s going to be easy to break this pair down either. I believe that we continue to go back and forth, with the 50 day EMA above pictured in red showing significant resistance. In general, this is a market that I believe is trying to form a bottom but it’s going to take several weeks if not months to make that happen. I believe that we trade right around the 1.12 level with a slightly downward bias.
The Euro has been grinding lower against the US dollar for some time now. To be honest, I am a bit surprise that we managed to break below the 1.12 level as it look like it was going to hold. This is because I see so much in the way of support extending down below, and as shown by the red line on the chart. I think at this point we may still be in the middle of a bottoming process, but it’s not until we break above the 1.13 level that I feel that much in the way of confidence will be expressed with the Euro.
The Euro initially rallied during the trading session after the tweeting of President Trump suggested that there was going to be further tariffs placed upon the Chinese. After that, the Chinese suggested that they were going to show up for the meeting to negotiate the trade deal with the Americans. This sent the markets throughout Asia and early European trading into a downward spiral, having the currency markets chop quite wildly. However, we ended up hanging about the 1.12 level, an area that is important from a psychological and a structural point of view. Although this was a reasonably bullish candle stick, the reality is that we still have a lot of resistance just above that could continue to cause issues. With that, it’s not until we clear above the 50 day EMA which is pictured in red that I’m a buyer. I suspect the first signs of exhaustion will be sold.
The Euro pulled back a bit during the trading session on Friday, but then shot higher after the jobs report. We are closing out the day close to the 1.12 level, which of course has a lot of psychological importance built in. The question now is whether or not we can continue to rally, and break out to the upside? For me, I need to see this market break above the highs of the Wednesday candle stick, the shooting star and the scene of the 50 day EMA to get bullish. I suspect that part of the push higher was probably due to short covering going into the weekend. That being said, this is not a candlestick you should completely ignore.