The market continues to favor the downside, so you cannot fight the overwhelming downward pressure that we have seen for quite some time now.
The euro fell a bit to kick off the Monday session before turning around and bouncing a bit. Ultimately, this is a market that had pierced the three recent hammers on the daily chart, which is a very negative sign. The recovery was worth noting, but it is not necessarily going to determine where we go next. In fact, if we break down below the hammer from the trading session on Monday, that would be a very interesting turn of events.
The market had a bit of an inverted hammer during the Friday session from last week, so it does suggest that we are going to find quite a bit of noisy behavior. In this indecision, the market will have to figure out where it wants to go longer-term, but it is worth noting that the 1.11 level above is the beginning of significant resistance, that extends to the 1.12 handle. We also have the 50-day EMA in that area, so I think there is a lot to chew through in order to turn things around.
Alternatively, if we break down below the bottom of the candlestick on Friday, the market could go looking towards the 1.0850 level. That is an area that begins a massive support level on longer-term charts, so it would be very noisy, to say the least. We have been in a downtrend for quite some time, and I think that you should continue to look for rallies to sell that show signs of exhaustion, as buying is just far too difficult to do right now.
The interest rate differential continues to favor the US dollar in general, so I think that you are looking for opportunities to pick up “cheap dollars.” The market has been very noisy, but decidedly negative over the last several months. The buying of the euro right now has no interest as far as I am concerned, at least not until we break above the 1.12 handle. At that point, then possibly a move to the 200 day EMA could happen, but I would not hold my breath for that either. The market continues to favor the downside, so you cannot fight the overwhelming downward pressure that we have seen for quite some time now.