The EUR/USD pair initially tried to rally on Thursday, but as you can see made a lower higher than the previous session. This is a sign of a market that is trying to build up bearish pressure, and on the daily chart things are looking a bit soft. Remember, we had a massive gap a few weeks ago after the poll results in France suggested that a centrist government was about to be elected. That gap has yet to been filled, which is something that almost always happens. I think traders are trying to make that happen now, but it might be a bit of a grind to the downside in the meantime. That gap is near the 1.0750 level, so we could have a way to go.
Exhaustion breeds selling
Every time this market tries to rally and show signs of exhaustion, I’m interested in shorting the market. The US dollar should continue to be favored over the EUR, as there are a lot of moving pieces in the European Union, not the least of which is that the United Kingdom is negotiating and exit. That is a huge below to the overall EU economy, so I think there are far too many questions for people to feel comfortable owning the common currency for the longer term, so it makes sense that we will continue to see this pair drop. Having said that, if we break above the 1.09 handle, I think we will then go looking for the 1.0950 level above there. A break above the recent high in the 1.10 region would be a continuation of the uptrend, but right now I think we have gotten ahead of ourselves, and the sellers are least trying to fill the gap below.
Written by FX Empire