(MENAFN- Daily Forex)

• The euro attempted to rally on Monday but failed, forming another shooting star pattern that signals continued weakness.
• I believe this decline reflects broader U.S. dollar strength, likely extending toward the 1.14 level and possibly lower.

The euro initially tried to rally a bit during the trading session on Monday but has given those gains back to form another shooting star. This suggests to me that perhaps the euro is in a bit of trouble. I do think that the overall downtrend should continue. I don't even think this is necessarily a Euro thing. I think it has a lot to do with the U.S. dollar. After all, the U.S. dollar has been strengthening since the FOMC statement in September.

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Historically speaking, at least quite often when the FOMC starts to cut rates, the dollar actually strengthens. This is because there are concerns out there about whether or not the economy might be in more trouble than people thought. And if that's the case, then the U.S. dollar becomes a bit of a safety currency and a safety play. So, with that, ultimately, you have to look at this as an expression of that.

EURUSD Chart by TradingView

The fact that we cannot hang on to gains and have rolled over suggests that we could go looking to the 1.14 level before it's all said and done. The 1.14 level is where the 200-day EMA currently sits, and it's an area that previously had been important multiple times. Anything below there, I think, opens up mass selling in the euro, and we really start to crumble. In that environment, I would anticipate that the U.S. dollar strengthens against pretty much everything out there.

And with that being the case, I look at this as a market that is a harbinger of U.S. dollar strength. It is in fact, starting to play out that way. Keep in mind that the 50-day EMA is at the 1.1623 level and dropping. I do think that is your short-term ceiling.

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