Keep in mind that the ECB is likely to cut rates. And of course, the previous candlestick was very negative looking. And typically, those long negative candlesticks do have a bit of follow through. Although we may get a short term bounce in the process. And there is a lot of risk off behavior out there. And then of course will favor the US dollar.
Furthermore, the Federal Reserve is likely to stay tight for longer than people expected, so that continues to put downward pressure on this pair in general. If we can break down below the 1.0450 level, then I think the euro could just fall apart. Certainly, it looks at this point in time as we are forming some type of topping pattern or consolidation.
I still lean towards consolidation for the year because both central banks are going to be kind of unable to do anything along the lines of tightening monetary policy. And I do think eventually the Fed does have to cut rates. The question is, will it be this year? At this point in time, I remain fairly neutral, but I do prefer fading rallies.
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