The euro rallied just a bit on Wednesday as the 1.14 level has offered a little bit of support. That being said, the market is essentially sideways in general, so I think we are looking at this as a market that is trying to figure out where it wants to go longer term, and is waiting for the CPI numbers coming out of America. That has been the case all week, and that is why we have been in such a tight range.
The entire world is essentially waiting to see whether or not the Federal Reserve will have to get aggressive with interest rate hikes, or if they can get away with taking a little bit of a breather. The CPI numbers coming out hotter than anticipated would be a very bullish thing for the dollar, due to the fact that people will be looking for more aggressive rate hikes. That could work against the value of the euro, as it is considered to be the “anti-dollar.” Furthermore, the head of the French central bank suggested during the trading session on Wednesday that “rate hike talk” has gotten a bit ahead of itself.
To the upside, the 1.15 level offers resistance and it extends all the way to the 1.16 level. The region has been important more than once in the past, so I do think that the move higher is going to be a bit difficult. If we were to somehow break above the 1.16 level, then I think it is over, and we are in fact going to find a massive trend change overall. That is obviously an issue right now, as the euro has been so negative, and I think there are a lot of concerns out there that could have the US dollar looking attractive, at least in the form of a “safety trade.”
Between now and the CPI numbers, I anticipate that we are going to see a lot of choppy behavior more than anything else so I would probably stay out of the market. Once we get a daily close outside of the range that we have been trading, that could give you a little bit of a “heads up” as to where we are going for a bigger move.
