- The Euro initially tried to rally a bit against the US dollar during the early hours of Wednesday but has seen sellers come back into the market to push things lower again.
- As we find ourselves reaching below the 1.13 level, this is a very interesting turn of events considering that the market is starting to look a little bit tired, and we could be in the process of forming a bit of a “phase shift”, which is when you start to change trends overall, going from bullish to bearish or vice versa.
Previous Consolidation
Previously, we had seen the EUR/USD pair consolidate between the 1.05 level at the bottom, and the 1.12 level at the top. With that being said, it’ll be interesting to see if the market does in fact break back into that area, because in that environment, we could enter a very similar situation to that we had been in for the better part of 2 years. We just bounced back and forth between these 2 levels, trying to sort out where we go longer term. I suspect this could end up being the way we go, but we have a lot of support between here and there.
I look at the 1.1250 level as short-term support, followed by the 1.12 level. What also makes 1.12 a little bit more interesting is the fact that the 50 Day EMA is reaching that area, which could cause a little bit of technical support. If we break down below there, then I think it gives you the “all clear” to look for the Euro to drop pretty significantly. Everything I see on the chart, it certainly looks as if we are in the midst of trying to form a “lower high”, which of course is bearish. However, if we were to turn around and break above the 1.14 level, then you have to look at the 1.15 level as the gateway to much higher levels. If we break above there, the US dollar is probably in trouble against not only the Euro, but most other currencies.
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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.