The Euro continues to be very weak, and it could break through the 0.95 level rather soon.
The EUR/USD currency pair fell again during trading on Monday as the “risk off” trait is most certainly in full effect. This is a market that will continue to be very noisy, but most decidedly negative. After all, we have the Federal Reserve willing to tighten monetary policy quite aggressively, and at the same time we also have a European Union that has nothing but trouble ahead of it. Ultimately, I do suspect this is a situation where there is no really good outcome for the Europeans, especially as energy is going to be an issue this winter. Ultimately, I think this is a situation that every time we rally, there will be plenty of sellers to get involved.
Hawkish Federal Reserve Will Affect the Markets
The US dollar has been like a wrecking ball against almost everything, and it should continue to be so. The market selling off during the day on Monday is just an extension of what we have already seen, and quite frankly I just don’t understand how it would change anytime soon. After all, the Federal Reserve is extraordinarily hawkish at the moment, and has reiterated its desire to tighten financial conditions to beat back inflation.
At the same time, the Europeans are going to be dealing with a land war and its periphery, and a lack of energy throughout the winter. There are already contingency plans in place for some corporations in case there are blackouts this winter, which does nothing to instill confidence when it comes to the economic situation of the region. Ultimately, Europe may have to strike some type of bargain with Russia in order to get back on its feet. This could be the death knell of the European Union, and I don’t say that to be dramatic. Sooner or later, countries will start to look after their own interests again, and therefore fracture the union.
- Rallies are to be faded at this point, with the parity level most likely being a major ceiling in the market.
- If we were to recapture the parity level, that would obviously attract a lot of attention, but right now I just don’t see how we have that type of strength in this market.
- The Euro continues to be very weak, and I think it could break through the 0.95 level rather soon, a level that was unimaginable just a few months ago.