The euro reached towards the 50-day EMA to test that technical indicator, as there was a little bit more of a “risk on” type of attitude around the world as Russian troops, at least some of them, walked away from the Ukrainian border. With this, the US dollar sold off, but at the same time we should keep in mind that this pair has been going lower longer term, and the recent surge higher had a lot to do with Christine Largarde finally recognizing that there was inflation. Do not get me wrong, she is not going to do anything about it anytime soon, but it caused a little bit of a shock.
When you look at the candlestick, you can see that it was a slightly positive day, but when you look at the overall attitude of the pair, we should continue to see negativity. We just formed a massive double top, and it looks as if we are trying to carve out a range between the 1.15 level above, and the 1.12 level underneath. Furthermore, the Federal Reserve should continue to be very tight with its monetary policy and only getting tighter, while the Europeans could consider doing something down the road. However, it is very unlikely that the European Central Bank is going to be that aggressive and will more than likely be the first one to blink.
If we can break above the 1.15 handle, then it really does not matter what I think is going to happen, we will have broken above a significant barrier. In that scenario, you would be looking at a potential move towards the 1.16 level, but I do not know that it would be easy. After all, there has been a lot of noise in that general vicinity, so I think what we have going on here is a market that is going to continue to be very noisy and choppy more than anything else. This makes sense in the type of environment that we are in, as we do not have a lot of clarity when it comes to risk appetite, nor do we have any clarity when it comes to geopolitics from the longer-term standpoint. I think we are in for a very bumpy ride going forward, and I just do not see that changing anytime soon.
