Euro Sits at Major Support Level

I would assume any rally will be sold into on the first signs of trouble.

The euro fell a bit on Friday in very thin trading. After all, it was Good Friday, and it makes quite a bit of sense that we would see very little in the way of movement. We are sitting at the 1.08 level, an area that has been very supportive previously. The 1.08 level has a lot of noise underneath that extends down to the 1.06 handle.

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The area underneath is going to be very noisy, so even though I think the market falls rather slowly if we do get a breakdown. At this point, the market is likely to have more of a grind than anything else, continuing the overall downtrend. Any bounce from here would be a potential selling opportunity on signs of exhaustion. Furthermore, the 1.0933 level is an area that could offer a little bit of resistance, but even if we break above there then we would have to deal with the 50-day EMA. The 50-day EMA sloping lower offers a dynamic resistance barrier as well.

Keep in mind that the interest rate differential continues to be a major issue, as the US rates continue to be much higher than European ones, thereby making the US dollar much more attractive. Beyond that, there is also the safety play of owning the US dollar, and there are certainly quite a few problems around the world that could continue to drive money into it. After all, Europe is the epicenter of a lot of these problems, including the war in Ukraine. Furthermore, the inflationary problem in the European Union continues to be a major problem, and there is a lot of concern when it comes to growth.

If we were to turn around and start rallying, I would assume that there would be a major shift in the global appetite. After all, the market has been falling for quite some time, but if we were to turn around and break above the 1.112 level, then I would have to rethink the entire situation. At that point, something would have changed quite drastically, and it will have shown a major turn of events. I do not see that happening anytime soon, so I would assume any rally will be sold into on the first signs of trouble.