The EUR/USD pair went back and forth during the session on Thursday, and a fairly volatile session. At the end of the day, we closed just slightly negative, but what I find most interesting is the fact that we did end up showing the 1.37 level as being supportive. That suggests to me that this market is going to bounce from here, albeit slightly. I think that the 1.38 level offers a lot of resistance above as well, so therefore this is essentially “dead money” at this moment. I don’t have any interest in risking trading capital on a market that has a 100 PIP range, and quite frankly even if we broke down from here one would have to simply expect some type of support to come back into the marketplace sooner, rather than later.
Monetary policy will have a great influence, but the monetary policymakers need to figure out what they want to do.
The biggest problem with trading this pair at the moment is that it is so heavily influenced by the European Central Bank, and the Federal Reserve. There are a lot of concerns out of Europe as to whether or not deflation will hit the continent, and the economic data seems to be a bit back and forth as far as that’s concerned. Further making this pair difficult to trade is the fact that the Federal Reserve seems to be a bit confused as to what it wants to do.
The Federal Reserve has recently stated that it was going to continue to taper off of quantitative easing, but it was not going to make any promises as to whether or not it would stick to that program. In other words, we have no idea what they’re going to do because I don’t think they know what they’re going to do. However, as long as the Federal Reserve continues to taper, there is the possibility that we see a move much lower. In this type of environment though, I prefer to trade the Euro against other currencies.
