The Euro has been noisy on Thursday, as we are still sitting below the important 1.14 level. At this point, I suspect fading rallies to be the play here.
EUR/USD
The Euro has been pretty choppy during the trading session, bouncing around quite a bit, but I think you've got a situation where traders are looking at this as a market that is still trying to sort out where to go next. The Euro probably sees quite a bit of resistance just above, offering selling opportunities probably closer to the 1.14 level.
The interest rate differential still favors the US dollar. Although it's interesting, the interest rates in America are dropping, but they are starting to price in the idea of multiple rate hikes coming out of the Federal Reserve, while the ECB was pretty implicit in their statement that they are done raising rates. So, it makes sense that the US dollar picks up strength. The Euro, I think, faces some concerns about energy later this year, possibly being a problem for the economy as well. So that comes into the picture also.
Technical Breakout and the Death Cross
Over the next several weeks, we could see the Euro drop down to the 1.12 level and possibly even ultimately to the 1.10 level after that. I have no interest in buying this EUR/USD pair. The 1.15 level, I think, is an area where you start to see a bit of resistance, and then after that, you have the 50-day EMA that has now broken below the 200-day EMA, kicking off the so-called death cross.
With this, I'm looking for the first signs of exhaustion to start selling after a short-term rally. Remember, the Euro really doesn't move much, so the fact that we're breaking out of a roughly 18-month consolidation range is a big deal, but how far it drops, we'll just have to wait and see. Again, I would love to see a bounce towards the 1.14 level and some sign of exhaustion. I might even take that trade at 1.15 to start buying more dollars, shorting this pair.
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