- The EUR/USD initially tried to rally during the trading session on Tuesday, but gave back gains as we got close to the 1.04 level.
- The 1.04 level is a large, round, psychologically significant figure that a lot of people pay attention to, but it is also the scene of the 200-Day EMA.
- Because of this, I think this is a market that is starting to run into some headwinds, and with all of the drama that is coming this week, it should not be a huge surprise to see this market start to move in one direction or the other.
Keep in mind that the Core PCE numbers come out on Thursday which of course is a major indicator that the Federal Reserve pays close attention to. As everybody is wondering whether they are going to loosen monetary policy or continue to tighten it, it makes a lot of sense that the indicator could really cause a lot of chaos in the market. Furthermore, Jerome Powell is speaking in front of the Brookings Institute, and of course, we have the jobs number coming out on Friday. In other words, there is a whole slew of data that could come into the picture and cause quite a bit of volatility.
Looking to Fade Rallies
That being said, when you look at the chart you can clearly see that there is a bit of hesitation to go higher. If that is going to continue to be the case, I still like the idea of fading rallies because quite frankly the European Union has a lot of issues that the Americans simply do not have to deal with. One of the first ones of course is going to be energy.
Yes, ConocoPhillips just signed a deal with Qatar Energy natural gas down the road, but that’s a couple years away. We still have to worry about getting through this winter, and rationing natural gas may very well cripple the economy. That being said, I think we continue to seek some type of clarity, and therefore it’s not till we break above the 1.05 level that I would become bullish. I break down below the 1.0250 level, the Euro could really start to unravel, perhaps reaching down to the parity level before it’s all said and done.
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