- The EUR/USD initially tried to rally on Monday but could not hang onto the gains.
- At this point, the market looks as if it is comfortable right around the 1.08 level, an area that had been significant resistance previously.
- One would think that we would see buyers coming into this market somewhere between here and 1.07, allowing for a continuation of the overall uptrend.
Market participants currently believe that the ECB will remain rather hawkish and are trying to convince themselves that the Federal Reserve will slow down the rate of hiking, and then eventually turn things around rather quickly. In fact, a lot of traders out there believe that the Federal Reserve will be cutting rates by the end of the year. Whether or not that’s true remains to be seen, but clearly, nothing that the Federal Reserve has said should lead you to believe that.
Expect Choppiness
Either way, there is a significant amount of support underneath, and you must look at the market through the prism of what it’s doing, not what it “should do.” Ultimately, this looks like a market that is more than willing to go higher, but it just may need to pull back to collect more traders. This is quite common, as no market goes in one direction forever. With that being the case, I think that eventually, we could make it to the 1.10 level, but I would pay extra close attention to the 1.06 level underneath. We break down below there, then he could show that the Euro is in serious trouble, and that could send this market tumbling.
Keep in mind that the US dollar of course is the safety currency in this equation, so if we start to have a lot of fear out there, the Euro will probably be sold off. Nonetheless, no matter what the world seems to hear, right now they believe that the US dollar is going to continue to soften, so in the short to intermediate term, it’s probably likely a scenario where you are looking for buying opportunities on dips that offer value. I can give you 100 reasons why that should not be the case, but ultimately the market is what you must deal with, not necessarily fundamentals. Expect choppiness, but I still think that there are plenty of buyers underneath.
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