- The EUR/USD has rallied significantly during the trading session on Tuesday as the PPI numbers in America came out at “only” 8.0% year-over-year.
- In other words, looks like traders are trying to begin the process of recovery, and the return to lose monetary policy.
- Unfortunately for traders, that’s not where we’re going because the Federal Reserve is nowhere near its target.
It is a bit surprising, but I think a lot of this comes down to machines trying to front-run the Fed, something that they have been good at in the past. However, somebody needs to really bring the question to the forefront of whether we are entering a new monetary regime. If that ends up being the case, things could get quite ugly for traders, because most traders have no idea what it’s like to be in a relatively tight regime. It’s been all about cheap and easy money for 14 years, as the Federal Reserve has created this mess that they are now tasked with dealing with.
Not Interested in Owning Euros
The candlestick for the trading session is turning into a bit of a shooting star, so if we break down below the bottom of it, I am more than willing to start shorting the Euro because quite frankly the European Union has no business showing any signs of strength at all. This has been a brutal rally, but that’s what you get in bear markets, so it should not be a huge surprise to see that happen. It does not take much to kick this market straight back down, as there are still a lot of people that recognize that the longer-term fundamentals certainly suggest that’s what should be happening. The 1.01 level would be my first target, followed by the parity level.
Alternatively, if we break above the top of the candlestick, then it’s possible that we could go looking toward the 1.06 level above, an area that previously had been both supported and resisted. Anything above there could change the trend, but we are still far from there, and of course, there are a lot of things can happen between now and then to extend the overall downtrend in the Euro as we are heading into winter, and Europe still must worry about heating homes. This is not a currency I want to own; despite the fact, this has been one hell of a trading opportunity.
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