The Euro has bounced a bit during the trading session on Thursday to reach towards the 50 day EMA as the 1.20 level has offered significant support. This is an area that I think is supportive all the way down to the 1.19 handle, so it is not a huge surprise to me that the market has bounced. One of the biggest things that has been influenced in this market as of late has been the 10 year note, as interest rates in the United States continue to climb. At this juncture, I believe that the market is trying to weigh the difference between interest rates rising in America, and the massive amounts of stimulus that are also coming out of that country which will cause a bit of a “push pull” effect on the greenback. In fact, this is probably less about Euro and more about the greenback in this market.
All that being said, we do need to focus on the European Union as well. This is a part of the world that has suffered at the hands of random lockdowns, and of course a shortage of vaccinations. This suggests that the market is probably going to punish the European Union due to it recovering much slower than other parts of the world. We did recently hear that the European Central Bank is probably going to do more monetary policy, so that could help but at the end of the day I think with this all means is that we are essentially stuck in a range.
When we did rally, we hit the 50 day EMA again, which is an area that has been important of the last couple of weeks. It is essentially flat, so that tells you just how much we have been drifting sideways more than anything else. I believe that to the upside, we have a massive amount of resistance at the 1.23 level, which extends to the 1.25 level. This is a major area of resistance and I think that it is going to be difficult to break above there, and quite frankly we need to stimulus at the very least to get the market moving in that direction, but if interest rates continue to climb, that is going to put a bit of a cap on the ability for the Euro to continue going higher. In other words, I believe that we chop back and forth right around the 50 day EMA in the short term.