The EUR/USD has rallied a bit during the trading session early on Wednesday but continues to show signs of exhaustion every time we try to break significantly above the 1.06 level. Because of this, I think we’ve got a situation where the Euro is either trying to kill time, or it’s trying to whisper something to us.
If it is trying to whisper something to us, it’s that it’s hit its peak. Quite frankly, the rate of change has slowed down drastically and while an uptrend pausing normally has me looking at the longer-term trend to see if there’s going to be a continuation, the reality is that we are just a few days ahead of Christmas, so it’s very possible that we may find ourselves in a situation where it’s just a lack of liquidity that is driving everything. I don’t know what the difference is, because, unlike many other markets, you can’t really tell what the volume is in Forex. Nonetheless, where at an area where I anticipated that there should be a lot of resistance, and the fact that we are there at the end of the year tells me that we are more likely than not going to simply bounce around and look for some type of bigger signal.
Choppiness Ahead
- It is very likely that the bigger signal happened sometime in early January, so I’m not holding my breath for anything at this point. I also recognize that Jerome Powell has pretty much killed the idea of the Federal Reserve acquiescing to Wall Street, and that will influence the US dollar.
- The ECB is still looking to hike rates, but it’s also worth noting that the European Union is likely to head into a significant recession.
- We may be starting to price in the idea of a global slowdown more than interest rate differential, and if that’s the case, it’s always going to favor the US dollar.
We have had an 8-handle rally from the bottom, which is more than enough of a correction for the longer-term bears. However, if we were to break above the 1.08 level, then one would have to assume that the Euro is going to go looking to reach the 1.10 level above. Either way, I think choppy behavior is probably more likely than not over the next couple of sessions.
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