If we do break down below the 1.06 level, it could open up some selling for a bigger move down to the 1.04 level. At the 1.04 level, we have the 200-Day EMA and the 50-Day EMA indicators, which are getting ready to cross and form a “golden cross.” While I’m not a big fan of this indicator, I do recognize that some people do pay attention to it. Breaking down below those moving averages opens up a significant amount of selling the could send the Euro back down the parity.

On the other hand, if we were to break above the 1.08 level, then the Euro could go looking to reach the 1.10 level, maybe even the 1.12 level. I think at this point in time the European Central Bank is probably going to flinch much quicker than the Federal Reserve will, meaning that they will loosen monetary policy before the Fed does. That doesn’t necessarily mean that happens right away, but eventually we will see the Euro sold off again. If traders start to focus on economies and not so much on interest rates, you can bet that the US dollar is going to strengthen because it is the biggest safety play out there.

Regardless, it doesn’t matter with the markets “should do”, it’s important what they actually do. Just follow these guidelines and look at these levels as guideposts, and with the market dictate where it goes next. Trying to outthink the market is a great way to lose money, and quite frankly you never know what the other people were doing or even what they are thinking. The next several days will be very quiet and then, so I’m not personally going to be trading it, and I suggest that you don’t either.

(Click on image to enlarge)

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