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The euro initially tried to rally a bit during the trading session on Wednesday and as a result sellers came in and pushed this market lower. All things being equal it's worth noting that the US dollar continues to strengthen as the federal Reserve cutting rates by 50 basis points is not only a bit of a shock. It also suggests that perhaps there's more trouble out there than people anticipated. If that's the case at this point in time, one would have to think that it's probably only a matter of time before the markets run back into the bond markets in America, which require US dollars.
That being said, it is worth noting that the 200 day EMA sits right around the 1.09 level, and therefore I think you could see a bit of a floor there. If we break through that large round psychologically significant number, then the Euro could be in serious trouble. Short term balances at this time, probably somewhat likely, but I think that with the currency action that we have seen during the day on Wednesday, it looks like the US dollar is really starting to flex its muscles again, and if that's the case, I think we probably have further to go and that every time we do rally, we probably have sellers looking to short the euro again.
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After all, both of these central banks are very soft at the moment, but if we are going to see a lot of problems, then the U S dollar is by far the first place people want to be that hasn't changed. And I don't think it's going to, at least not in the short term rallies are treated with suspicion at least until we can break above the 50 day EMA. All things being equal, I think this is a very choppy and sideways market, but certainly has more of a downward tilt these days.
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