This market will have to make a decision, but right now it looks as if we are simply trying to build up enough panic to drive through the parity level.
- The EUR/USD currency pair has rallied on Thursday to show signs of continuation in the same range that we have been in.
- The question now is whether or not we continue to see put downward pressure over the longer term, or if we see an attempt to turn things around.
- I don’t think that we are anywhere near changing the trend, and the fact that Friday is the Non-Farm Payroll announcement has not escaped my attention.
It's All About the Federal Reserve
A lot of traders on Wall Street believe that the Federal Reserve is going to step away from monetary tightening much sooner than they had initially planned. Ultimately, this is a big game of “chicken”, as the Federal Reserve continues to say the same thing, while traders continue to pay no attention to them whatsoever. Sooner or later, somebody is going to have to blink.
On the other side of the Atlantic Ocean, we have the bog that is the European Union economy looking for a windshield. Because of this, the 1.01 level underneath could be a target, and at this point, if we were to break down below there it’s likely that the market could go to the parity level. The parity level course will attract a lot of attention, so if we were to break down below it, I think that would be a very negative turn of events, as it could open up and move down to the 0.90 level, perhaps even to the 0.96 level.
The 1.04 level seems to be a major resistance barrier, as it was a previous support level. “Market memory” comes into the picture in that area, so it’s worth paying close attention to. The market breaking above the 1.06 level would be a major trend change, but I don’t think that happens anytime soon. All things being equal, this is a market that I think given enough time will have to make a decision, but right now it looks as if we are simply trying to build up enough panic to drive through the parity level. If we cannot, we may have found the bottom, but I think that might be a bit of a stretch at this juncture, because it’s a market that features the European Union, which is one of the big disasters just waiting to happen.