- The Euro has rallied rather significantly during the trading session on Friday as the US dollar has crumbled due to Jerome Powell finally admitting at the Jackson Hole Symposium that the Federal Reserve is not only going to cut, but we may be entering a cycle of cuts.
- With that, the market finally got to what it wanted as it had been bullying the Federal Reserve to get very loose, and now we're back to the liquidity trap.
- That'll be great for inflation for real people because this is exactly what causes inflation, but it does keep the asset prices moving and at the end of the day that's really what the Federal Reserve is there for.
We Could Go Higher At This Point
So, with that being said, I do think we've got a situation where the EUR/USD could go higher, perhaps to the 1.1250 level where I would anticipate seeing quite a bit of resistance. If we can break above there, then it's likely that we will go much higher. On the other hand, we could see that as massive resistance and the catalyst might be people being concerned about the economy itself rolling over.
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It'll be interesting to see how this plays out, but clearly this is a market that is anti-US dollar. We are a little bit stretched at this point. So, pullbacks do make a certain amount of sense, but it's really not until we break back below the 1.10 level. that I would start to have the conversation of shorting the market. So, I don't think I’m really looking at right now.
This market will continue to be very choppy and noisy. And of course, it's probably worth noting that the European Central Bank is likely to be loose with its monetary policy also. So, I don't think it's like going to be a straight shot higher.
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