I am watching the EUR/USD closely, as we are looking at a potential bearish flag, and this could send the Euro down to the 1.12 level underneath.
EUR/USD
As you can see, the Euro has fallen slightly during the trading session here on Monday, as we are coming back to the trading world after a significant sell-off in the US dollar after the non-farm payroll announcement on Thursday. At this point, I think traders are trying to look at the longer-term now.
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All things being equal, this is a market that I think continues to see a lot of questions as to the Euro longer term, mainly due to the fact that the situation in Europe is still worse than in the United States. You can make an argument that we are forming a bearish flag and a bearish flag that measures for a drop down to the 1.12 level. If we break down below there, then the market could really start to fall apart.
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Short-term rallies at this point in time, I think, are selling opportunities, with a 50-day EMA indicator near the 1.1540 level offering a barrier. If we were to break above there, then the market could start to see signs of exhaustion. This is a market that I will have a hard time trying to get too bullish about.
Ultimately, the market is going to continue to see a lot of choppiness, and I do think that anytime we show signs of exhaustion in the Euro, you have to be thinking about shorting, mainly due to the fact that the US dollar is stronger against multiple currencies, not just the Euro.
The Federal Reserve is anticipated to raise rates down the road here a bit, and I think that's part of what's going on, while the ECB, the latest inflation numbers coming out of Europe suggest that they won't be tightening anytime soon. So, I remain bearish.
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