- The euro initially rallied a bit against the US dollar on Monday but has given back some of the gains since then.
- This shows just how much that choppiness comes into the pair, as what initially looked like a very strong day just waiting to happen has given up this gain.
- However, there’s so much in the way of support underneath that I would not read too much into this candlestick, other than it is more likely than not going to be a continuation of previous behavior.
On the downside, the 50-day exponential moving average (EMA) is currently near the 1.09 level and could offer some dynamic support in case of a pullback. The 50-day EMA has been an important indicator for the pair in the past and traders should pay close attention to it. Overall, the euro remains a “buy on the dips” type of market, despite being stuck in a consolidation phase. However, the market could be very noisy due to concerns in Europe, including murmurs of European banks facing similar issues to US regional banks. Time will tell, but this could be important.
Look for Potential Breakout Opportunities
If the euro were to break down below the 50-day EMA, it could go down to the 1.07 level, where it would meet the 200-day EMA. Nonetheless, it is likely to continue finding buyers one way or another, given that traders are pricing in 150 basis points of rate cuts in the United States by the end of the year. Although it may seem unlikely, the markets are factoring this possibility, perhaps in response to the problems in the US banking sector or duration risks in the treasury markets that some regional banks in America are heavily exposed to. As a result, the euro is expected to remain volatile in the coming weeks.
It is worth noting that the eurozone’s central bank remains hawkish and that the euro could benefit from this in the long term. However, the current situation in Europe is a cause for concern and could affect the euro’s performance in the short term. Traders should be cautious with their position sizing and practice patience, as the market could continue to be volatile for some time. Although the euro may continue to consolidate soon, traders should keep an eye out for potential breakout opportunities, especially if the euro manages to break above the 1.11 level and clear the way for a move towards 1.12.
Ready to trade our daily Forex analysis? We’ve made a list of the best online forex trading platform worth trading with.