- The EUR/USD tried to rally on Tuesday, but simply could not hang on to gain as we continue to see weakness every time we try to go forward.
- The Euro is likely to go down to the 0.95 level sooner rather than later, which is a large, round, psychologically significant number, and could cause a little bit of a short-term bounce.
- I do not believe that’s likely to be a long-term bottom, because quite frankly there’s too much going on in the European Union to believe that things have changed completely.
The energy situation in the European Union alone will cause major issues, and therefore I think you’ve got a situation where any signs of strength will get sold into, as it allows you to pick up “cheap US dollars” against what is arguably one of the worst currencies in the world own now. The parity level above should be a massive resistance barrier and breaking above it would take a huge amount of effort. I think now, we are more likely than not going to see more of a “fade the rally” move every time we do get a bounce. After all, the Federal Reserve continues its tightening monetary policy, and I think it is more likely going to continue to be a situation where the US dollar is the only game in town.
Looking for Opportunities to Short
That’s been the way for a while, so a little bit of a relief rally could come into the picture, but I would not look for it to be an opportunity to get long, because the fundamental situation is not changing anytime soon, but occasionally, you’ll see quite a significant amount of profit-taking to send the market back around. The parity level for me at this point is going to be the barrier that the market will continue to pay close attention to. Anywhere between here and there that we see signs of exhaustion I will be looking to start shortening. On the other hand, if we turn around break down below the 0.95 level, it’s possible that the Euro could go to the 0.93 level. At this point, I think things are going to get much worse before they get any better in this market.
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