- The EUR/USD faced a decline on Wednesday as bearish pressures continued to weigh heavily on this currency pair.
- The emergence of a substantial shooting star pattern on Monday indicates that the market is susceptible to manipulation by the bearish flag, steering prices further downward.
- In the event of a breakdown below the 50-Day Exponential Moving Average, the market is likely to gravitate towards the bottom of the flag, situated near the 1.06 level. If this level proves permeable, the subsequent target could be the 1.05 level.
It is essential to bear in mind that market participants are diligently monitoring the interest rate differential between the European Union and the United States. This factor plays a pivotal role in shaping market dynamics. Despite the prospect of continued volatility, the prevailing sentiment appears to favor a downward trajectory. After all, there are a ton of issues in the realm of geopolitical situations as well.
In light of these circumstances, I find it reasonable to look at the strategy of capitalizing on short-term rallies by shorting the market, seizing opportunities that arise when signs of exhaustion become apparent. This allows you to get “cheap US dollars.” Furthermore, I am comfortable with the idea of shorting the market should a breakdown below the 50-Day EMA occur. If that happens, I suspect there will be a bit of a feedback loop that starts more selling.
The Market Remains Devoid of Momentum
While the prospect of the euro surging to the 1.09 level, corresponding to the top of the flagpole itself, is not likely in the short-term, it remains a potential scenario that traders should keep in mind. Additionally, we should consider the impact of upcoming speeches by Jerome Powell within the next 24 hours, which could influence market sentiment.
In the grand scheme of things, the market is still under the control of sellers, and buyers must demonstrate their resilience to reverse this prevailing trend. Recent discussions revolving around the Federal Reserve potentially slowing down its monetary policy tightening due to the latest jobs data did not significantly alter the prevailing sentiment. The interest rate markets continue to relay a different narrative, and the market remains devoid of momentum following the dramatic move witnessed last Friday.
Potential signal: Anywhere near the 1.0760 as an interesting region to start shorting. I would have a stop loss at the 1.0833 level. The target would be the 1.0580 level.
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