The euro initially tried to rally a bit during the trading session on Thursday but then turned around to show signs of negativity. After all, the market had gone straight up in the air for quite some time, it makes a certain amount of sense that we would have to pull back a bit. Furthermore, we have the PCE numbers coming out during the day, and that will have a certain amount of influence as well. Regardless, this is a market that needed to pull back after a surge to the 1.10 level previously. The 1.10 level of course is a large, round, psychologically significant figure, and an area that’s been important in the past.
With that being said, the question now is whether or not this is a short-term pullback, or if it is something bigger? Ultimately, this is a situation where we have seen a lot of negative downward momentum, so I do think that you get a little bit of follow-through. With that being the case, I think the 1.0850 level underneath could be support, followed by the 1.08 level. This of course is an area that previously had been important, and therefore I would anticipate a little bit of support in that region. If we were to break down below that level, then obviously things will have changed quite drastically. Underneath there, we have the “golden cross” that kicked off, when the 50-Day EMA crossed above the 200-Day EMA indicator.
In general, I think this is a rather negative turn of events, but you would need to see a little bit more to start shorting the euro at this point. We need to see what the next day or 2 brings, to determine whether or not it is more of a pullback, or a change in the overall direction. This will be something that you can notice around the world, if the pair continues to fall, you probably see the US dollar rise against almost everything, including other currencies, precious metals, etc. In general, I think the next 2 sessions will be crucial, so those who are already long of this market are probably going to try to tighten their stop losses, as we are at another inflection point.
Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.