Photo by Tabrez Syed on Unsplash
In Wednesday's trading session, the euro experienced a slight decline, retesting the 200-Day Exponential Moving Average (EMA). Moreover, the currency also broke below the low of the previous session's hammer candlestick, indicating a potential erosion of significant support levels. If the euro continues to break down from here, there is a possibility that it could drop to the 1.05 level, which holds both psychological significances and has previously acted as a support level.
Currently, any rallies face substantial headwinds, largely due to the recent negative sentiment surrounding the euro. The situation is further exacerbated by Germany's entry into a recession. As the largest economy in the European Union, Germany's economic performance greatly influences the entire region. Thus, the fate of Europe is closely tied to that of Germany.
The 50-Day EMA, located near the 1.08 level, is acting as a short-term resistance in the market. If the euro manages to break above that level, it would be a strong bullish signal. However, it is also possible that the market sets up a scenario where short-term rallies can be faded. Conversely, if the euro breaks above the 50-Day EMA, the next target could be the 1.10 level. Nevertheless, the prevailing sentiment suggests that the euro is likely to continue drifting lower, as concerns persist and traders seek the safety of the US dollar.
Ultimately, this market will need to make a more significant decision in the future. However, at present, the downside appears to be favoured. Therefore, short-term rallies present selling opportunities. Additionally, if the euro breaks below the low of the recent candlestick, it would be a signal to sell. A shift towards a bullish stance would only occur if the euro breaks above the 50-Day EMA.
inputs from / FXEMPIRE
