Looking at the charts, you can see that we have most certainly seen a lot of selling pressure as of late. However, I do see some demand around the 1.16 level, so bounce could be coming. Otherwise, if we break down below the 1.1580 level, it’s likely that we will go lower from here to test the 1.15 level, an area that is much more supportive. Right now, it certainly looks bearish but there is reason to think that there should be significant interest in this region. If that’s going to be the case, abounds cannot be ruled out.
I think the one thing you can count on is volatility, which seems to be picking up overall. I think that if we break down below the 1.15 level, the Euro could fall apart rather rapidly. While the interest rate differential does favor the US dollar, eventually value hunters will come into play, and pick this pair up again. I do not think that we will break down below the 1.15 level, but if we did, at that point you would have to become aggressively short of a currency that was breaking down drastically. At that point in time, I would anticipate a move to the 1.13 handle, and then possibly even the 1.10 level, an area that was inconceivable just two weeks ago. Rallies at this point will struggle near the 1.1650 handle. A break above there opens the door to the 1.1745 level.