Euro likely to continue downward move

The Euro initially tried to rally during the trading session on Wednesday but as you can see we have failed again. By selling off about half the gains early in the day it suggests that the market is going to continue the downward pressure from the Tuesday session as well. Recently, we have been consolidating a bit, but I think we are due for a bit of a move at this point.

Consolidation range

Looking at the chart, you can see that we have been consolidating over the last couple of weeks between the 1.1250 level and the 1.1175 level. That area has been very noisy, and interesting considering that we had recently rallied so stringently into this area but cannot keep the gains for any significant length the line. Ultimately, the fact that we can hang onto the gains after such a strong sell off shouldn’t be a huge surprise, and if we can break down below the hammer from the Monday session, it’s very likely that it will open up a bit of a “trapdoor” to the downside.

Potential target

The potential targets that I see at this point is the 1.11 the EUR level, an area that has been important more than once. It’s a large, round, psychologically significant figure, and of course the bottom of the longer-term consolidation. There is a lot of noise between there and the 1.10 EUR level, so I think that we could go down to that level as well. It isn’t going to be easy though, as it is going to have so much noise at this point.

That being said, if we were to break out above the last couple of candlesticks, then the potential target could be the 1.13 handle, and then the 1.14 level. The 200 day EMA is just at the 1.13 handle, so it’s very likely that we will see quite a bit of resistance and noise there. In other words, we have a couple of different targets depending on which direction we go, but right now I do favor the downside. I think the one thing you can count on though is that there will be a lot of noise in this market, as there are so many moving pieces around the world right now.

Limit your expectations

You should probably limit your expectations with any type of move, because the pair does show a lot of choppiness under most normal conditions, and the fact that the central banks both are looking to have relatively easy money policies suggests that we will get a lot of clarity. All things being equal, we should also keep in our minds that it is the wrong time of year to expect big moves typically, as a lot of the larger traders will be away at vacation. Once we get closer to the month of September, then we might see a bit of momentum. Until then, I think it’s a choppy situation where we are more than likely going to go looking towards the 1.11 EUR handle underneath.