- The euro initially rallied against the US dollar but has given back quite a bit of the gains during the session as it looks like we continue to see a lot of noise overall.
- Ultimately, I think this is a market that you have to be very cautious with because I do think that it is going to be very noisy.
- However, if we do break down below the 1.0775 level, then I think we have a deeper correction.
This could be a sign that the US dollar is going to strengthen against multiple things. And in that environment, the euro is normally one of the first things to get hammered. I think also you have to look at the possibility that perhaps the market will turn around and stays in this consolidation range that we have been in for a while.
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This consolidation ranges between the 1.08 level and the 1.0950 level has been important for a couple of weeks. And now we, after seeing such a massive shot higher, have to determine whether or not we will consolidate or if we will have to pull back in order to find value. After all, the interest rate differential between Europe and the United States continues to change. And with that starting to favor Europe, or at least moving in that direction, that makes the euro a little bit more palatable.
Germany Leads the Way
It's also worth noting that Germany is leaving a recession. That's huge too. But gravity eventually influences things. And I think that's part of what we're seeing here. Any pullback at this point in time, I don't necessarily think changes the trend. I just think it gives us a little bit of a breather for buyers to come back in and pick up cheap euros.
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