The Euro rallied a bit during the trading session on Thursday, trying to continue the move higher but obviously we have rolled over a bit, showing signs of concern. I like the longer-term downtrend in this pair, and I believe that the US dollar will continue to strengthen overall. There are still a lot of issues in Italy, and although we have seen a significant bounce, when looked at in the prism of the longer-term move, it hasn’t been that big of a deal. We have rallied about 200 pips but have fallen roughly 1000 during the move. In other words, we have only recaptured about 20% of the selloff.
This will be an interesting couple of weeks, because I believe that the 1.15 level will be massive in its implications, as it was a significant resistance level previously. I think it’s going to take a lot to break down through that level, but it is such an important level I find it difficult to believe that we won’t at least try to test it one more time. If the Italians can get the situation under control over there, it’s likely that we will see a reason to go higher, but interest rate differentials continue to favor the greenback overall. If we were to break down below the 1.15 handle, then I think we will probably seek 100 pips increments to the downside going forward. Currently, I believe that we are going to go lower in the short term so I’m not looking to buy this market anymore.