The Euro fell apart during the trading session on Thursday as Russia invaded Ukraine, causing a lot of fear on the continent. That being said, later in the day we had learned that just how little the West was willing to do, and therefore the Euro rallied a bit as it looks like the shooting war in Ukraine is going to continue to be contained suggest that region. As long as that is the case, there is a little bit of hope for the Euro, but clearly the US dollar is favored in general.
Interest rates continue to favor the US dollar, as the Federal Reserve is looking very likely to tighten much quicker than the European Central Bank, and that should continue to be one of the major drivers of this market. Ultimately, I do think that we probably break down below the lows of the day but to get there and just a few hours was probably asking a lot out of the market. The 1.11 level has proven itself to at least be interesting for buyers, so we can break down below there, then I think the market reaches towards the psychologically significant 1.10 level.
Keep in mind that the US dollar of course is considered to be a safety currency, so if things do flareup in Europe again, perhaps some type of expansion to the fighting, it is likely that the Euro will be one of the first victims. With that in mind, it is very likely that this continues to be very volatile market, but one that certainly favors one direction over the other. With this being the case, the markets continue to see a lot of noisy behavior and therefore you need to be somewhat cautious with your position size. That of course is good advice in any market, but when you have this type of insanity, it does make a certain amount of sense that you become even more resilient about that.
I do believe that ultimately the 1.10 level will be an area that a lot of people show up at, and with the 50 day EMA currently lower at the top of the most recent action, it makes a certain amount of sense that we do in fact see that as a major barrier going forward.
