The EUR/USD has been trying to rally significantly for a while now. It’s probably worth keeping in mind that we have been in the channel recently, so I think at this point it’s more likely than not going to be a situation where we see choppiness more than anything else, as we continue to bang around between these 2 trendlines.
Looking at the chart, you can see that the 200-Day EMA is sitting below and could offer a little bit of support. Ultimately, the market is trying to predict that the Federal Reserve is going to step away from its tightening policy, and while that may be true, it is going to stay tight for quite some time. There’s a huge difference between pivoting and sitting tight, and I think this is where the market has a bit wrong. Nonetheless, if the Federal Reserve were to step away from tightening, that almost certainly would drag the CD with it, so I think at this point it’s a rally that’s living on somewhat borrowed time.
Market Remain Very Noisy
- A lot of this is going to come down to your timeframe. If you are a shorter-term trader, then obviously you probably have more of an upward bias.
- However, when you zoom out, you can see that the market has bounced from an extraordinarily oversold condition.
- With that in mind, the rally is probably necessary. However, if the market does turn back around it’s likely that we will see a complete breakdown.
On the upside, if we can take out the 1.06 level, then I think that the Euro could find its way to the 1.08 level eventually. That is where the next major resistance barrier is, therefore, it would make an ideal target. Whether or not we get above there of course is going to be a question for another day, but right now it looks as if that’s at least what the market is trying to get to. A lot of this is going to come down to whether we are in more of a “risk on” or a “risk off” type of situation. This is a market that I think is going to remain very noisy, so therefore you are probably going to be better off trading from short-term charts with a slightly upward bias until we get through the CPI numbers on Friday, and then of course the central bank meeting next week.
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