The EUR/USD pair fell during the course of the session on Tuesday, as we continue to grind our way down in this market. In fact, we got below the 1.07 handle, and as a result we are clear to go down to the 1.06 handle. We believe that rallies will continue to offer selling opportunities all the way up to the 1.09 level, so any rally at this point in time would have to be looked at with suspicion. On top of that, we believe that the former uptrend line that had formed the ascending triangle will continue to work against the value of this pair as well, and therefore we have several different reasons the think that this market will continue to drop.
With that being said, we like exhaustive candles on short-term rallies for selling opportunities. We also recognize that a break down below the bottom of the range for the day is a selling opportunity as well. With this being the case, we believe that this market is essentially a “one-way trade”, at least at the moment.
Keep in mind that the European Central Bank recently suggested that further stimulus could be taken if needed. By doing that, they sent the value of the Euro drastically lower. This is been further compounded by the fact that the jobs number out of America was so strong last week. In other words, it’s very likely that the Americans will be raising interest rates far before the Europeans do, and that will tighten the interest-rate differential between the two currencies. Because of this, we believe that this market will continue to go to the downside, especially if we end up getting stronger economic numbers out of America going forward. If that’s the case, that will only strengthen the case for a Federal Reserve interest rate hike, and with that it should continue to drive up the value the US dollar. Ultimately, it appears that the US dollar will continue to strengthen for some time now, but we are at extreme levels. With that being the case, we are playing this market to the downside for short-term moves.