It certainly looks as if the market continues to struggle with anything close to euro strength. 

• The EUR/USD currency pair continues to go back and forth without any real direction or conviction one way or the other. 
• By doing so, it is causing headaches for traders that are trying to get a feel for where we are going next.
• In order to understand where we are going next, you need to take a look at the longer-term trend, which is most decidedly down.

Long-Term Downward Momentum

While this does not guarantee that we break down from here, it does suggest that the overall momentum of the market is negative from a longer-term standpoint, and that is something that should not be forgotten. Because of this, we will have to pay close attention to the top of the consolidation box and we are presently trading and, with the 1.03 level above offering significant resistance. Underneath, the 1.01 level offers significant support, so it’s very likely that we continue to bang around in this general vicinity as we look for some type of decision.

If we break down, then the most obvious place to start looking for a decision would be near the parity level, which of course is an area that will attract a lot of attention. We had bounced from there previously, and now it looks like it will perhaps be a bit of a target going forward. I don’t necessarily believe that this is a situation where we break through it easily, but it certainly looks as if the market is willing to at least attempt it again.

With the jobs number coming out on Friday it’s possible that could be the reason we break down below there, but if we do turn around and rally, I would think that there should be plenty of sellers above that could get involved as well. Those sellers will more likely than not be found at the 1.03 level, as well as the 1.04 level where we had previously seen a bit of support. That brings “market memory” back into the picture, and of course, we have the 50-day EMA in that general vicinity as well, so it’s a bit of a “one-two punch” for this market. This doesn’t mean that things are going to be easy, but it certainly looks as if the market continues to struggle with anything close to euro strength. That in and of itself is something you should be paying attention to.

Ready to trade our Forex daily forecast? We’ve shortlisted the best Forex trading brokers in the industry for you.

The only way I see this changing for a bigger move to the upside is if we see a complete roundabout by the Federal Reserve.

The British pound went back and forth on Wednesday, essentially not having any idea what to do with itself. Unfortunately, we are in an area that is probably attractive to both buyers and sellers, and based on the way that we continue to bang around in this region, I don’t know if that will change anytime soon. When I look at this, I can see just how negative the longer-term trend is, but it’s also worth noting that the 1.22 level has been heavily defended.

The 1.24 level above is resistance, and I think a break above there would be a rather bullish sign, but even then I also can make an argument that the 50-day EMA which is presently slicing through the 1.26 level could come into the picture and cause a lot of selling pressure as well. Ultimately, this market continues to be very messy, but that’s true with everything right now, as the US dollar is by far the strongest currency, and there seems to be nothing but fear and noise in the markets. Add to that the fact that the Federal Reserve Chairman spoke during the day in front of Congress, and you have a recipe for a lot of nonsense.

Ultimately, I do favor shorting this market, especially as interest rates in America remain so elevated. With that in mind, I think this is a situation where eventually we do test the 1.20 level again, and then eventually break down through it. Once we do, I think we have a good shot at making a rather major move afterward. In that scenario, I anticipate that the 1.18 level could be targeted, and then after that the 1.16 level. Expect a lot of chop and volatility, but to be honest I could say that about almost every market that I follow right now. Everything is being thrown around by the bond market, so you need to keep an eye on the US 10-year yields because they will have a major influence on what happens next. The bond market continues to be a big mess, and that has a huge influence on what happens in currencies, stocks and everything else. The only way I see this changing for a bigger move to the upside is if we see a complete roundabout by the Federal Reserve.