The EUR/USD has initially pulled back a bit during the trading session on Friday, but then shot much higher as the Bank of Japan has intervened in the Forex markets. They sold the US dollar against the Japanese yen in order to protect their own currency, but at this point I think it’s likely that we will see that get reversed. In the short-term, it does make a significant amount of negativity enter the market. The 50-Day EMA sits just above, which of course is something worth paying close attention to as well, as it looks as if we ended up forming a bit of a downtrend line.
At this point, I’m looking for signs of exhaustion that I can start fading, because the European Union has a huge mess on his hands. It’s likely what we will see is the downtrend continue over the longer-term, but there is also the “hopium” in the European Union now that the German energy minister announced that there is a framework in place to start talking about building a consensus for energy price caps. In other words, there is the hope of hope. Even if they do get price caps working on energy, the reality is that it only works if you cut supply. This is not going to be cohesive to a strong economy, so I do think that it is only a matter of time before that headwind reappears.
- If we do break above here, it’s likely that the parity level will be a major barrier and will attract a lot of attention due to that.
- The parity level is not physically special other than the fact that there’s a certain amount of psychology with these big, round, numbers.
- Ultimately, this is a situation where I’m looking to fade rallies every time, we get an opportunity to, and pick up cheap US dollars along the way. I
believe that the 0.95 level will be targeted, and if we can break down below there, then it’s likely that we go looking to the 0.90 level after that. Regardless, I just don’t have an interest in trying to buy the Euro in this current situation. The Federal Reserve continues to be very tight with its monetary policy, and therefore it’s likely we continue to see US dollar strength.
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