The EUR/USD has rallied significantly during the trading session on Tuesday to show signs of life again, testing a major downtrend line. By doing so, the market looks as if it is trying to break out, but there’s no real reason to believe that the Euro is the place to be at the moment. After all, the European Union is nowhere near securing energy for the year, and of course the Federal Reserve remains tight.
However, hope burns eternal on Wall Street that the Federal Reserve will come and save them, so they continue to push the narrative that the Fed is going to “pivot soon.” The Federal Reserve has done everything you can to tell Wall Street that it’s not going to, but for some reason they don’t want to listen. The market tries to push the Federal Reserve into doing something, and then the Federal Reserve stands its ground, causing the markets to crash again. We’ve seen this multiple times, and this is mainly on the hands of American traders, because we see most of the nonsense during the New York session.
The 50-Day EMA sits in the middle of the candlestick, and if we were to break down below there, then I think we could get a little bit of downward momentum. Even if we do break above the top of the downtrend line, the great thing about downtrend lines and trendlines in general, is that you can redraw them as many times as you like and make one of them fit the narrative. In other words, we are still in a downtrend even if we break this downtrend line.
Breaking it down below the bottom of the candlestick opens up quite a bit of selling pressure, and I think at this point in time what we are seeing is more or less going to be thought of as a “relief rally” in a currency that had been oversold.
- The US dollar has been parabolic against almost everything, so you do need to think that sooner or later the markets would have to adjust.
- With that being said, I’ll be looking for signs of exhaustion that I can start shorting again, because this is a market that has no business rallying for any significant amount of time.
- I also believe that parity will have a lot of resistance as well.
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