The EUR/USD pair went back and forth during the day on Friday, testing the 1.33 level for resistance, and then turned back around to fall and show the 1.33 level has been too much for the buyers. We fell down and ended up testing the 1.32 region as well. We bounce slightly towards the end of the day, but ultimately this is a negative candle that tells me this market is ready to go lower.
If we can get below the 1.32 level, we believe that this market goes down to the 1.30 handle, which is a much more significant support level. However, looking at the longer-term charts, I am convinced that the real target will be 1.28, which is much lower than I originally anticipated. Any bounce from here should be a continuation of the downtrend waiting to happen as the trend has been so strong.
No need to fight the trend.
There is no need to fight this trend, as it has been so strong. Quite frankly, I only have two ways of looking at this market: either sell it, or way to sell it at a higher level. Think of any bounce at this point in time to be considered to be "value" as far as the US dollar is concerned, but should be temporary at best. I believe that the US dollar is going to continue going much higher based upon the US Dollar Index is concerned, and you have to keep in mind that this Forex pair is 40% of that futures contract. In other words, it is essentially the "anti-US Dollar Index", and therefore the two move in exact opposite directions.
With that, I don’t see any reason to buy this market at all, and really wouldn’t be concerned about doing so until we get above the 1.34 handle at the very least. Having said that though, we did break down below the bottom of the uptrend line some time ago, so it makes sense that the downtrend does continue and that there will be a significant amount of resistance above. With that being said, I am “sell only.”