I am simply looking to fade the rally every time it occurs until proven wrong.
The euro bounced from the crucial 1.08 level, an area that has been supported previously. By doing so, it does suggest that perhaps the market is trying to save itself and form a short-term “double bottom.” Whether or not it holds for a massive trend reversal is a completely different question, but at this point, I think a bounce does make a certain amount of sense.
Any bounce in the euro more than likely will end up offering a selling opportunity at the first signs of exhaustion, and as a result, I will be looking to short-term charts to take advantage of that. We are still very much in a downtrend, and it does not look like much has changed, other than the fact that we had tested a big area of noise. I suspect that the 1.09 level will be a little bit noisy, followed by the 1.0933 level and then the 50-day EMA.
If we turn around a break down below the 1.08 level, the euro could go looking to the 1.06 level, which is the bottom of the overall consolidation area just below. That being said, I think is going to be more of a grind lower than any type of major breakdown, because it is so noisy in that general vicinity. With that in mind, I think it is only a matter of time before we see the market reach the bottom, but it will be very choppy.
Keep in mind that the interest rate differential between the United States and Germany continues to be very wrong, and that favors the US dollar. Because of this, I think that the market will probably continue to drop from the longer-term standpoint, but we have fallen quite drastically over the last couple of weeks. A little bit of a bounce would make sense, but I do not see a scenario in which I am willing to buy this market anytime soon. The Euro would have to break above the 1.12 level for me to get bullish from a longer-term standpoint, so ultimately, I think this remains a very negative market as things stand right now. With this, I am simply looking to fade the rally every time it occurs until proven wrong.