- The euro is still seeing a small increase, but there is still a significant lack of momentum and a lot of loud activity.
- Nevertheless, it appears like the market wants to stay in a range moving forward, which could be a sign of things to come for the overall forex world this year as all central banks seem loose at this point in time.
The Euro has been grinding upward versus the US dollar in the early hours of Tuesday, showing some vitality, although there is still a lot of noise just above. We must get beyond the 1.09 level above as a major obstacle in order to get to the 1.10 level.
There could be a lot of support for short-term declines, not just at the 50-day EMA but maybe even at the 200-day EMA. Having said that, it is OK for the market to remain quite boisterous. If you look back historically, that turbulent euro vs the US dollar is more often than not the reality.
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Possible Floor Below
The 1.07 level is probably your floor right now, and the 1.10 level above is probably your ceiling. Given that this market is literally in the middle of everything else, you have to consider the possibility that as we move closer to fair value, things will get even noisier and more of a grind than we've seen in the past.
There will probably be a consolidation range that this pair spends the majority of the year in since both central banks are expected to feel pressure to lower interest rates this year. Recall that the euro is one of the major currencies with slower movement in any case, primarily due to its liquidity, which explains the little spread you notice. It is a bit much to look for significant changes in the Euro.
And given how similar the two central banks appear, it will be particularly true this year. You also need to remember that Germany's recession is a problem for the European Union. It is highly likely that they will need to take action, possibly even more quickly than the Federal Reserve. Ultimately, though, interest rates in each of these sectors will be declining.
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