I like the idea of fading short-term rallies, assuming that we even get a rally to short at this point in time.
The euro initially tried to rally on Friday but gave back gains above the 1.10 level as we continue to see a lot of negativity out there. The US dollar is favored in times of concern, and it makes sense that money would flow into it.
Furthermore, you have to keep in mind that interest rates in America are much stronger than they are in the European Union, so it makes a lot of sense that we would see the US dollar as much more attractive. Furthermore, we have to now focus on the Federal Reserve meeting next week, as we have gotten the ECB meeting out of the way. In other words, there is much more likelihood of a US dollar-related headline coming out than the euro.
It should be noted that this market looks very vulnerable to the downside regardless, so I think it will take very little to push us much lower. I do believe that eventually, we will see a breakdown towards the recent lows, and below there even. The 1.08 level was the most recent low, so pay attention to that region. On the upside, we have the 1.11 level as massive resistance, and I think that is your short-term “ceiling in the market.” From there to the 1.12 level is a significant amount of resistance, so I think given enough time we can see wicks in that general vicinity as a selling opportunity, assuming that we even are able to rally towards that area.
Ultimately, this is a market that is going to continue to fall, and I think we may go as low as 1.05 over the next couple of months. The war in Ukraine of course has a lot to do with what is going on, but we also have to worry about the lack of growth in the European Union, and the fact that the ECB is light years away from tightening monetary policy to any type of consequence. I like the idea of fading short-term rallies, assuming that we even get a rally to short at this point in time.