The Euro has broken down during the trading session on Thursday as Jerome Powell failed to deliver during the speech to calm the bond market. That being said, we are now finding the Euro trading right around the 1.20 level, an area that offers support down to the 1.19 handle. With this being the case, the market is very likely to see a bit of a pushback in this general vicinity, but we also have the jobs number to think about during the Friday session, so that of course is going to cause a significant amount of volatility during the day.
It will be interesting to see whether or not the market can break down below the 1.19 handle, because if we do so, then the market is likely to continue going lower. A lot of this is going to come down to the yields in the bond market, and whether or not they continue to strengthen. As yields strengthen, people start to worry about stocks and also will by fixed income as it offers a guaranteed return. Obviously, those bonds require US dollars to purchase, so therefore you will see the USD rally against most other currencies.
On the other hand, if we do get a bit of a rebound from here, we could go looking towards the 1.22 continues to be a bit skittish, so I do not think that handle. Obviously, this is an area that we have been bouncing around in for some time, as the market has been very choppy. The 50 day EMA is flat, so that does suggest that at the very least we are grinding sideways. To the upside, if we were to break above the 1.22 handle, then we could go looking towards 1.23 level which has been so resistive in the past.
All things being equal, this is a market that I think will continue to see a lot of back and forth so you need to be cautious about your position size while we will clearly get wild swings occasionally. The overall attitude of the market continues to be somewhat skittish, so I do not think that we will see some type of major breakout to the upside. If anything, there is probably more threat of a breakdown if we do get some type of momentum picking up.
