- The euro faced some downward pressure in the recent trading session as the job figures turned out to be hotter than expected. This development has led to a situation where the 50-day Exponential Moving Average is under threat.
- However, we have seen the market turn right back around, only to get stopped again.
- It is widely believed that Wall Street traders will do their utmost to convince themselves that the Federal Reserve will continue to support the market to protect their stock portfolios, hence the hopium.
How can they achieve this? It's quite straightforward – by keeping interest rates low. Many traders are placing their bets on this strategy, as they anticipate that the Federal Reserve will maintain its accommodative stance. In the grand scheme of things, it's expected that little will change by the end of the day. Moreover, it's crucial to consider the possibility that traders may shift their focus to the upcoming week, where more data will be available, and liquidity will likely increase. Many traders are still working from home and have not yet returned to their offices, which could impact market dynamics. Regardless, this situation is likely to create an opportunity for buying on the dip.
50-day EMA
At present, the 50-day EMA holds significance, and the lower boundary of the overall uptrend is estimated to be near the 1.0750 level. A breach below this level would signal a bearish sentiment. It's noteworthy that the Federal Reserve has already adjusted its projections on the dot plot, hinting at potential rate cuts in the coming year. This information has already influenced market sentiment. With that in mind, the U.S. dollar is poised to strengthen in the long run unless there are major economic concerns or the European Central Bank (ECB) concedes to rate cuts.
At the end of the day, the EUR/USD faced some downward pressure due to hotter-than-expected job figures. The 50-day EMA is a key point to watch, and a break below the 1.0750 level would be bearish. Traders are closely monitoring the Federal Reserve's stance on interest rates, with expectations of continued support for the market. The outlook for the U.S. dollar appears to be strengthened in the absence of significant economic concerns or a shift in the ECB's policy. All things being equal, I think the ECB will eventually shift but right now it doesn’t look like the market is trying to price that in.
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