The Euro rallied on Wednesday, as the interest rate markets tried to price in the idea of peace in the Middle East.
EUR/USD
The Euro did shoot straight up in the air during the early part of the trading session on Wednesday, but the 1.18 level is an area that I think offers a significant amount of resistance extending all the way to the 1.1850 level. This is a major area of contention and resistance, and we have pulled back quite a bit from it.
So, what have we learned here? I believe what we have learned is that the interest rates dropping in America of course is bad for the US dollar, but at the same time interest rates were dropping in Germany as well. Therefore, not much has changed. This was all based on the idea of peace breaking out in the Middle East, possibly, but that's a story we've heard before. It's probably only a matter of time before somebody does something, like launching a missile at a boat, to kick the whole thing off again.
Range-Bound Market Conditions
Regardless, when you look at the chart from a longer-term standpoint, we are most certainly trading in a range and the 1.1850 level is the top of that, with the 1.14 level being the bottom. In other words, we're relatively close to the top and fading short-term rallies that show signs of exhaustion are still the way I'm going to find some type of exhaustion or selling pressure to jump back into the market.
The 50-day EMA down at the 1.1685 level has offered support over the last couple of days. Breaking that to the downside would be huge actually. I think right now we're just looking at sideways action, probably in about a 130-pip zone. We're right in the middle of that and then above there we have even more resistance. So, I think short-term day trading probably works here in a back-and-forth type of manner, but anything beyond that you're really fishing.