- The Euro has been rather quiet during the trading session on Monday after having an explosive Friday session reaching the 1.16 level.
- The 1.16 level is a large round psychologically significant figure that a lot of people will be paying close attention to.
- The 1.16 level has been important multiple times and what I am seeing around the forex world is that the US dollar isn’t necessarily willing to roll over during the day.
At this point we are sitting on top of the 50-day EMA and in and of itself that does make a certain amount of sense that we would see sideways action but if we can break down below here then we could go to the 1.15 level.
Support Breaking Opens Move Lower to 1.14 Quickly
The 1.15 level being broken through could open up a move down to the 1.14 level. The 1.14 level offered a nice support level. If we were to break down below there, then I think we really see this market fall apart. In that scenario, we would see the US dollar gain against almost everything. With the Euro being a large portion of the US dollar index, I think you’ve got a situation where you would see other currencies like the Canadian dollar specifically, maybe a few other ones, such as the Australian dollar, New Zealand dollar really taken on the chin.
The dollar has seen a certain amount of negative pressure due to the jobs number, but again, the initial knee-jerk reaction is almost never the correct one. After all, if the United States were to enter a recession, that’s going to play havoc with the rest of the world. Ultimately, I think that we are in the midst of trying to change the narrative in the market, and it tends to be a very messy affair. So, watch 1.14 for a breakdown and 1.16 for a rally. That could open up a move to the 1.18 level, which I think at this point in time, you have to look at as the potential ceiling.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.