The EUR/USD pair initially tried to rally during the course of the session on Friday, but found the 1.15 level above to be far too resistive to continue the move higher. Once we got the disappointing jobs numbers out of America, the US dollar rallied due to the perception that there will be a bit of a “risk off” attitude to the marketplace, and with that we ended up forming a shooting star. The shooting star is a very negative sign, and could send this market lower on a break below the bottom of the range for the day.
With this being the case, the market should then reach towards the 1.12 level. That area would be supportive as well, and having said that this market will more than likely continue to see sellers enter the market over the short-term, and will more than likely continue to offer quite a bit of volatility. With that being the case, it’s a fair assumption to assume that the market could very well be choppy. This is a market that’s been very choppy recently anyways, and with all of the conflicting headlines coming out of both the Federal Reserve and the European Central Bank, it’s likely that we will continue to bounce around back and forth.
At this point in time, the Federal Reserve looks less likely to raise interest rates and a reasonable clip, and with that being the case it makes sense that the US dollar might have originally been overbought, but we also have to look at the fact that perhaps the world’s economy isn’t going as well as people had anticipated, and people will apply the US dollar as a result. In one of them biggest paradoxes in the trading world, with the US economy does poorly, the US dollar does well because people start buying treasury notes. At this point in time, the next couple of sessions will probably feature the market drifting a bit lower, perhaps again reaching towards the 1.12 handle. We have no interest in buying until we get back above the 1.15 level at the very least.