- The EUR/USD currency pair has pulled back a bit during the trading session on Wednesday as we have seen a lot of negativity as far as risk appetite is concerned out there.
- We have CPI coming out on Thursday, and that will almost certainly have a certain effect on the market as well, as the entire world is sitting there watching and trying to figure out what the Federal Reserve is going to do next.
- After all, it’s all about the Federal Reserve, and has nothing to do with the economy as per usual.
Focus on Interest Rates Differential
With that being the case, we will take a look at interest rates and see what they do over the next couple of days to determine where we go next, but it does look like we’ve run into a bit of a brick wall in the short term. I think given enough time, we probably have a situation where the traders out there will have to focus on more interest rate driven news than anything else. Furthermore, the reality is that the ECB will probably have to blink much quicker than the Federal Reserve will when it comes to interest rates, as the EU has a whole host of major problems to deal with right now.
The 50-Day EMA sits underneath, and then of course we have a huge load to risk appetite out there as FTX has collapsed. Granted, that is a crypto related bit of news, but everything is connected now, so it should not be a huge surprise that we would see the ripples go out to other markets. After all, most funds have their toes in just about anything that moves these days.
I anticipate that we will probably see this market pullback into consolidation, and perhaps crumble if we see a significant shot higher in CPI. After all, if the Federal Reserve is forced to get aggressive even more, then it’s only going to drive the value of the dollar higher, as traders will be scared to death on anything else. Longer term, I think that we could very well test the lows again, but I am completely open to the idea of a continuation of the relief rally that we have been in for a while. Nonetheless, I anticipate this is going to be messy and noisy to say the least.
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