The euro rolled over during the trading session on Wednesday as Federal Reserve Vice Chair Richard Clarida was more hawkish than anticipated. That being the case, the market is reacting with a dollar-positive move due to the idea of interest rate hikes as early as 2023. Ultimately, the market looks as if it is ready to roll over and go looking towards the lows again near the 1.1750 level. If that is going to be the case, then it is likely that we will see a rather quick move between now and the jobs figure. That being said, the jobs figure is coming on Friday and that will have a lot to do with what happens next.
To the upside, we have seen a lot of resistance in the same area, so it does make sense that the market will continue to look at the area above as a serious problem. With that being the case, I think it is only a matter of time before the market participants sell short-term rallies that get anywhere near that death cross above. If we were to break above there, it would obviously be a massive negative sign, and a lot of buyers would probably come back in to pick it up and try to push this market towards the 1.20 handle.
If we were to break down below the 1.1750 level, then it is likely that we would see the market break down even more significantly, reaching down towards the 1.16 level. That is a large, round, psychologically significant figure that would attract a lot of attention, so if we were to break down below there all hell would break loose.
Pay close attention to the US Dollar Index and the 10-year yield, as it could give us an idea as to where the value of the US dollar is going to go. Furthermore, the interest rate differential between the United States and Germany should be paid close attention to, because that is also another big driver of where this pair goes next. I think there are a lot of concerns just under the surface when it comes to the overall global appetite. With that in mind, it is very likely that we will see some massive volatility.
