- The EUR/USD has gone back and forth during the trading session on Friday as we continue to ask serious questions of the 1.06 level.
- That’s an area that has been important multiple times in the past, so it’s not a huge surprise to see that it has offered a significant amount of resistance now.
- If we can break above that level, that would obviously be a very bullish sign but to think that it was going to happen this week was probably a bit of a hard ask of the market.
This is mainly because the Federal Reserve has a meeting on Wednesday that will almost certainly dictate where monetary policy is going over the next couple of months. Traders expect a 50-basis point rate hike, but it’s going to be more about the statement afterward. Furthermore, we have the European Central Bank interest rate decision on Thursday, so I think now we have a high potential for a lot of volatility next week.
We Are Not Out of Danger
After all of that is said and done, if we are above the 1.06 level, it’s very likely that the Euro has much higher to go. On the other hand, if we turn around and break down below the 200-Day EMA, then it would be a breakdown that would favor the US dollar for a bigger move. I think between now and then, we are going to see a lot of back-and-forth trading in this channel, so I’m not looking for much of the market for the next several days.
Unfortunately, after that central bank announcement and the reaction, that might be it for the year. We will then start to focus on the holidays, as liquidity disappears completely. In that scenario, we may get a sudden move in the next week or so, followed by a lot of sideways action. There’s also the possibility that we would see market participants have to react to some type of announcement or unforeseen news, and in an illiquid market, that can be a very violent thing indeed. In other words, we are not out of the danger, but I do think that next week will be crucial to determine where we go for a while.
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