The euro went back and forth on Wednesday as we continue to see markets trying to figure out where to go next. The 50-day EMA is as good of an indicator as any other one, as the markets are trying to figure out whether or not the CPI numbers on Friday will be better or worse than anticipated. Because of this, I suspect that Thursday will also be relatively quiet.
When you look at this chart, you can see I’ve drawn a rising wedge, but it looks like we have just drifted through it, so I don’t know how much credence I can put into this formation. With that in mind, if we do break down then the implied move would be to reach the 1.04 level given enough time. If we break down through there, then the market is likely to go much lower, perhaps reaching to the 1.02 level, and then eventually the 1.00 level over the long run.
On the upside, if the market were to break above the 1.08 level, there is a lot of noise between there and the 1.09 level, so I think it will take quite a bit of effort to break above there. If we do, then it could open up the possibility of a move all the way to the 1.12 level, but there is also the 200-day EMA sitting just below there, so I think you could look at that as a potential problem as well.
The CPI numbers coming out on Friday will almost certainly have a major influence on where we go next, as traders are trying to determine whether or not the Federal Reserve is going to remain extraordinarily hawkish or not. If the numbers come out higher than anticipated, that will almost certainly send this pair lower as people will start to push yields in America much higher again. Furthermore, there are a lot of concerns out there when it comes to global growth so that typically favors the US dollar anyway. Ultimately, this is a market that probably will go sideways over the next two days, before perhaps dropping. However, we need to keep an open mind as there is always the opposite scenario that could come into the picture as well.
