The Euro went back and forth during the trading session on Tuesday as we continue to dance around just below the 50 day EMA. However, there is support underneath at the 1.20 level, that extends down to the 1.19 handle. That being said, the market looks as if it is getting squeezed a bit, and the fact that the economic outlook for the European Union is starting to damn a little bit could continue to pressure the market to the downside.
EUR/USD Video 03.02.21
However, I think the big elephant in the room is the fact that stimulus in the United States is not only going to be smaller than anticipated, but we may actually be through the pandemic and everything else by the time it actually arrives. In other words, the devaluation of the US dollar may have been a bit premature, because now we may have to reprice the greenback again. Furthermore, the European Central Bank has made comments recently that suggests there could be more liquidity measures taken, which of course will weigh upon the Euro in general. That being said, if we break down below the 1.19 level, we could see a significant move to the downside. Beyond that, if you squint just a bit you could make out a bit of a head and shoulders pattern that has just broken, but I think it is probably a bit much to get overly excited about it.
To the upside, we will probably reach towards 1.22 level before running into selling pressure again, and that of course the 1.23 level above which has been a major resistance barrier more than once. My base case in this market is still more sideways than anything else in the 300 point range I have marked on the chart.
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.