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You have to pay close attention to rallies as potential selling opportunities.
The euro broke down significantly Monday as we have broken through the bottom of a hammer on Friday. This suggests that we are going to get to parity rather quickly, perhaps even by the end of the day on Tuesday. I thought this was something that we would see late in the summer, but the turo has completely collapsed.
Because of this, it’s very likely that we will continue to see a lot of downward pressure, but I also would anticipate that the parity level could bring in a few value hunters. I don’t know if it holds, but if we do rally at this point, it will more likely than not get sold into at the first signs of exhaustion. The 1.02 level should offer a significant amount of resistance to get above, but if we can break above there, then the 1.04 level would be the next major area to break above. If we can clear all of that, then you might have the makings of a turnaround. However, I don’t see that happening anytime soon, and at this point, I think we may even see this market drop drastically from here.
If we were to break down below the parity level, when you look at the longer-term chart you can make an argument for the euro to go looking to the 0.85 level over the longer term. It’s difficult to say that will happen easily, but it is a possibility going forward. Furthermore, I believe you have to look at the possibility of this market as one that is going to have wild swings, but I just don’t see how things turn around anytime soon. Furthermore, the Federal Reserve continues to see reasons to tighten, and therefore it is driving the US dollar higher against almost everything.
As long as inflation continues to roar in the United States while the Europeans are worried about keeping power running, it makes no sense to think that the euro is suddenly going to be a strong currency. In fact, I think that we are going to continue to see the euro melt down during the bulk of the summer, so with this being the case I think we’ve got a scenario where you have to pay close attention to rallies as potential selling opportunities.
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