Euro breaks significantly
The Euro broke down rather significantly during the last couple of trading sessions, with Wednesday being particularly brutal. After we broke down below the 1.12 level, it shows signs that the Euro could be in trouble. It’s not just the Euro though, it’s the US dollar. However, as the EUR/USD pair is the largest traded financial judgment in the world, this is the chart that most people will watch if they don’t have access to live pricing from the US Dollar Index.
It’s very possible we go even lower
At this point, the 1.11 level is going to be somewhat supported, but now that we have broken through the beginning of what is a block of buying pressure in the past, and now that we are at the very edge of it, it’s very likely that we break down from here and go looking towards the 1.10 level underneath which is the next major psychological level. Alternately, we could bounce from here but the 1.12 level will probably cause a significant amount of resistance.
The systematic effects
As this pair breaks down, it brings out and overall US dollar strength around the world. This will drive down the price of many of the favorite instruments that you trade. It won’t just be the Euro, it will also have a direct correlation with gold and silver, and several other commodities. The one outlier might be the crude oil market, but it has its own thing going on when it comes to geopolitical concerns with the Americans looking to pull back sanction waivers for dealing with the Iranians. That has put a bit of a shock into the system when it comes to crude oil, so it would make sense that crude might be its own situation.
What’s even more interesting is that as the US dollar strengthens, it’s very likely that there will eventually come a time where stock markets start to feel the pinch as well. Remember, the US dollar strengthening quite often will be a problem for exports, especially when the US dollar is strengthening because of weak global growth. If that’s going to be the case, this will eventually drive up the price of US exports, which many other people around the world will be able to afford in a poor environment. Eventually greenback strength will cause problems in places like the S&P 500 and the NASDAQ 100.
The main take away
Whether you trade this pair or not, this is one of the most important charts to pay attention to right now when it comes to currency. If we were to break down below the 1.10 level, that could spell trouble for a lot of markets across the world. Ultimately, this pair looks to be very broken and it would not be able to be bought until we broke above the 1.13 level, something that doesn’t look very likely to happen in the short term. Ultimately, it looks as if the US dollar is going to be the only game in town in the short term.