- In my daily analysis of the EUR/USD pair, it’s obvious that we have plunged quite drastically after breaking above the 1.10 level during the previous session.
- That being said, the market is likely to continue to see a lot of movement back and forth between the large, round, psychologically significant figures, such as the 1.09 level, the 1.10 level, and so on.
With that being said, I think this is a market that is going to continue to be very choppy and nonsensical, but that’s not really that uncommon for the EUR/USD pair. Keep in mind that this is a market that features to central banks that are likely to be cutting rates, so therefore there is not a big argument to be made for one currency over the other from a longer-term standpoint. Furthermore, when you look at the way the pair has behaved over the last several years, you can see that we have essentially been bouncing back and forth between the 1.05 level in the 1.11 level.
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Federal Reserve and European Central Bank
The Federal Reserve of course is likely to cut rates in September, and therefore I think you have a situation where people are trying to get ahead of what the Federal Reserve may do in the future. That being said, the reality is that some traders believe that the Federal Reserve is going to cut by 50 basis points, while quite a few more think that it’s only going to be 25 basis points. The real question is going to be how they cut into the future, and whether or not it will be aggressive?
The European Central Bank of course is going to continue to have to deal with a recession, so therefore one would have to assume that sooner or later they are cutting as well. This essentially brings this pair into a relegated level of back and forth range bound trading that people will be paying close attention to. Quite frankly, I think we just go back and forth from one large handled to another.
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