Clearly, it certainly looks as if we made an attempt, but we have not had the follow-through yet for a longer-term trend change.
The euro fell a bit on Monday as it looks like we are struggling to continue the overall momentum. The market is currently hanging around the 1.1450 level, forming a bit of a “double top.” With this being the case, the market breaking down below the 1.14 handle could kick off more selling pressure. After all, the European Central Bank suggesting that they were paying attention to inflation has people looking towards the euro due to the idea of interest rate hikes.
In fact, the markets have priced in two interest rate hikes from the ECB, something that will never happen. The job situation in the European Union alone will cause some problems. With this being the case, the market is likely to continue hearing a lot of questions asked about whether or not the ECB can hike, and quite frankly I think there will have to be a reevaluation of the entire situation. If we break above the 1.15 handle, then it is possible that we could go higher, perhaps reaching towards the 200 day EMA.
The candlestick is rather small, just as the Friday candlestick was. The Friday candlestick is a shooting star, so if we break down below the 1.14 handle, that would confirm that potential selling opportunity, although I think there is support underneath at the 50 day EMA. This is a market that will be very noisy and continue to go back and forth, so you should probably be small with your position size. That is probably true with almost everything in the Forex world right now or for that matter, the trading world. There will continue to be a lot of noise out there, so I do think that we probably need to get overly aggressive anywhere. That being said, the US dollar is going to be considered a “safety currency”, and as long as we continue to see a lot of concerns around the world, you have to consider the idea of this market falling significantly again. Ultimately, we have to see where the next impulsive candlestick appears, and whether or not the market will finally make up its mind. Clearly, it certainly looks as if we made an attempt, but we have not had the follow-through yet for a longer-term trend change.
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