- The EUR/USD initially rallied on Thursday provide struggled to stay above the parity level.
- At the end of the day, we ended up forming a bit of an inverted hammer, which suggests that perhaps we are going to continue to see downward pressure.
- However, Friday is a bit of an outlier at this point, due to the fact that Jerome Powell is speaking at the Jackson Hole Symposium, and the whole world is trying to see whether or not the Federal Reserve is going to continue being hawkish going forward.
Looking at this chart, you can see clearly that we are in a downtrend, and there’s nothing out there to make me believe that the Euro will suddenly be a currency that you want to own. Even if we were to turn around and break above the top of the inverted hammer, which is a traditionally bullish sign, I will just step to the side and look for an opportunity to start shorting at higher levels. The 50 Day EMA above is sitting near the 1.02 level and dropping quite drastically. I think that any approach to that area will see a lot of resistance and selling pressure.
Traders Waiting for European Central Bank
If we were to break down below the last couple of candlesticks, then my target is the 0.98 level. The 0.98 level is an area that traditionally has been important, but you must go back over 2 decades to see when it was last tested. I think at this point, everybody knows that the European Union is going to have a very bleak winter, so I think a lot of people are going to have to keep that in mind, especially when they try to judge what the European Central Bank will have to do. They will almost certainly have to be loose with monetary policy, and therefore it is worth noting that the US dollars on the other side of the spectrum, as the Federal Reserve, must fight inflation, and does at least try to pretend like they are going to do so.
Fading rallies continue to be my favorite way to trade this market because I do know that typically after a choppy move like we have seen followed by a big drop, we chop around a little bit more and then go lower again.
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