The EUR/USD has been very noisy during the trading session on Wednesday as we continue to hover just below the parity level. This is a particularly interesting pair because it is going to be highly driven by speculation on what the Federal Reserve is about to do. With the Jackson Hole Symposium going on at the moment, there is a lot of waiting around on Jerome Powell.
If the speech at 10 AM Eastern Standard Time on Friday is extraordinarily hawkish, that will probably send the Euro much lower, as the US dollar will strengthen. Even if we do rally after that speech, I suspect it is probably only a matter of time before we see sellers jump back into the market and punish the Euro. After all, the interest rate differential between the 2 is rather wide and is almost big enough to drive a truck through. Beyond that, there is a whole host of other issues in the European Union that you would have to be cognizant of.
Winter is Coming
- The most obvious issue is going to be the energy situation in the European Union, due to the fact that the Russians are holding natural gas hostage.
- At this point, it looks like it’s going to be a very brutal winter for the European Union, so it’s not a huge surprise to see the traders jumping all over the currency.
- Every time this market rallies, it’s likely that we will see plenty of sellers. The 50-Day EMA is just above the 1.02 level and is dropping quite significantly.
Even if we were to break above that level, then we have the 1.04 level to offer resistance, and then it’s possible that we could see the 1.05 level offer resistance as well. In fact, it’s not until we break the role that I would even consider buying the Euro, but really at this point in time I think that any rally at this point in time is going to be begging to see sellers come in and take advantage of “cheap US dollars.” On the downside, I anticipate that the market is going to go down to the 0.98 level, which is an area that historically has been important. Ultimately, this is a market that I think continues to see a lot of noise, and at this point, I hope it bounces so that I can start shorting.
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