The euro initially tried to rally to kick off the week on Monday, but you can see that the top of the channel has held. This resistance barrier has been interesting to pay attention to, and although it’s not a perfect downtrend line, it certainly has held overall. Looking at the chart, the 50 day EMA sits just above as well, so that’s another reason to think that perhaps technical sellers will come back in.
The EUR/USD pair has rolled over a little bit, and that of course is going to be the main measuring stick of Euro strength or weakness. That being the case, I think that we will continue to drift a little bit lower, perhaps reaching down to the 1.65 level underneath. Ultimately, this is a market that should continue to find a bit of a bid in favor of the Kiwi dollar, mainly because it is a proxy for Asian trading.
However, if we were to break above the highs from the Friday candlestick, roughly 1.6750, then you could begin to talk about the channel being busted, and a potential trend change coming. A lot of what we are seeing here is probably going to have to do with optimism around the US/China trade negotiations, and therefore it’s likely that this will be very noisy, but pay attention to those Chinese headlines, because those will have a lot to do with what happens with the Kiwi dollar going forward. At the same time, Germany narrowly avoided recession recently, and Italy has entered a technical recession, so this of course makes sense that it would lineup for a lower move. Beyond that, we will have information coming out of the European Central Bank that could suggest that the ECB is looking to extend the time before they enter a tightening cycle. That of course would be bearish as well.
