No discussion about markets can take place without consideration to the basic underlying measure of currency. In this case, we examine the US dollar’s intrinsic counterpart, the Euro. We could have just as easily looked at the US dollar but we’d have to measure it against another currency or basket of currencies as is the case with the US Dollar Index. The Euro is close to being a mirror for the US currency. Logically, the conclusions we arrive at would imply the inverse for the US dollar.
We observe the long term monthly chart of the Euro, shown below and it’s clear that over an 8 year period, the Euro has been in a steady decline. (chart by Ninja Trader)
The peak occurred in 2008 as the world experienced the financial and banking crisis. A waterfall selloff in 2014 took the Euro down through a descending triangle to levels not seen since 2004. Prices are now in a flag type channel as traders look for support. Based on the activity in this long term chart, the path of least resistance is down.
In the short term, news or rumors can move prices randomly and even a move to the 1.15 level would not change the overall bearish picture. We expect that this period of consolidation will yield to even lower prices for the Euro.