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The Euro has bounced ever so slightly during the trading session on Friday, limping into the weekend. At this point, the market looks as if it is ready to go much further, but we may get a short-term bounce in the meantime. This would make a certain amount of sense considering that we have just broken through massive support, and maybe getting a little bit oversold from the short-term perspective.
On the upside, the 1.05 level is where we had broken down from, so would make quite a bit of sense to revisit that area. Between there and the 1.06 level I would anticipate seeing a lot of noise and resistance, so I will be looking for an exhaustion candle in that region to start shorting again. After all, the US dollar continues to be like a wrecking ball against almost everything, as it is by far the strongest currency out there.
The European Central Bank has a lot of issues right now, not the least of which will be trying to protect an economy that is having issues with energy. That almost certainly means a slowdown, so at this point, I would be cautious about trying to play any bounce. On the other side of the Atlantic Ocean, you have the Federal Reserve which is more than willing to get hawkish and tighten the screws on monetary policy. With that being said, this is a market that is on a one-way path to lower pricing.
You want to look for some type of value when buying a currency, and this is a perfect example of that. Simply jumping in and shorting this market right away is somewhat reckless, although it almost certainly is the right thing to do over the longer term. I will be looking for that bounced offer “cheap US dollars” that I can pick up value based upon.
Given enough time, I believe that this market could go to the parity level, although that is a major psychological area that will attract a ton of attention. This does not necessarily mean that it happens quickly, but unless the Federal Reserve changes its overall tune, not to mention the ECB, there is almost no reason to think that we will not make it sometime in the next several weeks, or perhaps couple of months.
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