The euro rallied a bit during the trading session again on Tuesday as we have seen a nice recovery after the European Central Bank press conference sent the euro just below the 1.12 level last week. However, it’s very likely that the longer-term traders came back in and as it is a major support level at the 61.8% Fibonacci retracement level.
That’s a level that has been important more than once, so it is not much of a surprise to see institutional buying in that area. At this point, it looks as if we are getting ready to take out the massive negative candle stick from last Thursday, and if we do that is a very bullish sign. This isn’t to say that it’s going to happen in one fell swoop, but in the meantime it looks like short-term pullbacks are going to continue to be thought of as buying opportunities in this market. After all, even though we broke the 1.12 level, we turned right back around.
The last three days have been good for the euro, as opposed to a knee-jerk reaction. That is a very good sign, as we start to approach towards the 50-day EMA. The EMA of course has been sliced through several times, so I think at this point it’s very likely that the moving average has lost its importance, and therefore I don’t put too much credence into it. However, the 200-day EMA, which coincidentally is at the top of the larger consolidation area, still sits above. It is because of this that I think we continue to see a lot of choppiness in this marketplace as the Federal Reserve is on the sidelines, and most certainly the ECB is after last week’s press conference.
This is a pair that tends to have traders looking at one side of the Atlantic or the other, but never at both. As we start to focus on the Federal Reserve again, that should bode well for the Euro. However, the European Union economy is not strong enough to lead to a breakout. After all of that noise, it looks like we are still continuing to bounce between 1.12 level at the bottom, with 1.15 being the top. As we are closer to the bottom, it makes more sense to start buying on dips.
