The EUR/USD initially tried to rally for the trading session on Wednesday, but it now looks as if it is trying to form some type of “double top” at a very crucial level. The 1.04 level has been very resistant as of late, and of course, the fact that we have a multitude of potentially market-moving events over the next couple of days will have a significant influence on where we go next.
Jerome Powell is speaking late in the day, and therefore the speech that he gives at the Brookings Institute might capture a lot of attention, as it could give a little bit of a “heads up” as to what the Federal Reserve is going to do over the longer term. While a lot of people are expecting the Federal Reserve to slow down its rate of interest rate hikes, the reality is that the Federal Reserve is likely to remain tight for much longer than people anticipated.
Choppiness Ahead
- We also have the Core PCE figures coming out on Thursday, which is the Federal Reserve’s favorite metric to measure inflation. After that, we have the jobs number on Friday, so it all comes together quite nicely for a huge bout of volatility.
- The US dollar continues to attract a lot of inflow based upon fear anyway, so I think we are at an area where we need to make serious decisions on the longer-term direction of this pair.
- When you look at the chart, you can see that the 200-Day EMA sits near the price action as well, just above the current level.
- Underneath, we have the 50-Day EMA, which I think will be the initial target, near the 1.01 level. After that, then you start to look toward the parity level for a potential target.
Regardless, I think one thing you can probably count on is going to be a lot of choppy behavior, and therefore you should probably think of this more or less along the lines of a “range-bound market” with the overall tilt to the downside. If we break above the 1.05 level, that will obviously change a lot of things, and if we can sustain that move, it could be the beginning of a trend change. It’s a bit much to imagine that, but if prices go higher that will be the signal.
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