The Euro initially tried to rally during the trading session on Thursday but gave back all of the gains to form a less than stellar candlestick. By doing so, this confirms that we are still very much in a downtrend, and at this point, it looks as if there is not much out there that is going to keep the Euro afloat other than a few small technical levels.
When you look at this chart, you can see that we have been in a downtrend for quite some time, as the 50 Day EMA is racing lower and is now threatening the 1.10 level. The 1.10 level course is a certain amount of psychological resistance just waiting to happen, but it should be noted that the 1.0933 level has offered a significant amount of resistance on short-term charts as well, which is basically where we fail a bit during the trading session.
Underneath, the 1.08 level continues to be a major support level, and therefore it is worth paying close attention to. Between the 1.08 level and the 1.06 level, there is a significant amount of noise on longer-term charts, and that should end up being a major battlefield for this market. I think that the market will more likely than not continue to see a lot of noise and therefore it is going to be difficult to break through all of this. In other words, I think it is going to be more of a grind lower than anything else.
On the upside, if we were to turn around and take out the top of the shooting star-shaped candlestick for Thursday, that would obviously be a very bullish sign. This could even have the Euro threatening the 50 Day EMA, and then eventually the crucial 1.12 level. It is not until we break above the 1.12 level that I would consider being a buyer of this market, because then we will have turned around completely, and broken structure.
As things stand right now, it is obvious that the European yields are nowhere near as strong as the US yields are, and of course, the European Central Bank is nowhere near being able to tighten monetary policy, while the Federal Reserve is likely to remain very hawkish. As long as that is going to be the case, it makes quite a bit of sense that we continue to see the downtrend.