The EUR/USD currency pair has been struggling to break through the 1.09 level, with a significant shooting star formation from the previous week in this area. The resistance is likely to continue, possibly extending to the 1.10 level. A breakthrough above the 1.10 level may change the situation.
Next Potential Target at 1.06
However, signs of exhaustion are expected to appear again as the market still faces similar problems, including the potential slowdown of the global economic situation. Furthermore, interest rates in America are stubbornly high and are likely to continue so, despite the Fed Funds Rate markets suggesting a possible 150 basis point increase by the end of the year. The Federal Reserve has not been in alignment with market participants.
If the Euro breaks down below the 1.08 level, the market may find support at the 50-Day Exponential moving Average, with a potential target of the 1.06 level. Breaking below that level may cause a significant drop towards the 1.05 level, which has a certain psychological significance. Anything below that level may trigger massive selling, leading the market down to the parity level.
Keep in mind that a move down to the parity level would be a huge drop and would more likely than not be incongruence with some type of significant “risk off of and” around the world. We certainly have plenty of reasons to think that could be coming, but the “hopium” remains strong with a lot of traders out there. The idea that the Federal Reserve is going to cut interest rates anytime soon as a bit of a pipe dream, but there are still plenty of people out there that think they are going to do everything they can to come save them. Quite frankly, most of this people need that to happen, so it’s not necessarily based on reality.
EUR/USD Today's Trading Signal:
- I believe that if the market breaks below the 1.08 level, I will start selling the Euro as it will confirm the massive amount of selling pressure between the 1.08 level and the 1.10 level.
- The stop loss order would have to be somewhat sizable, with a minimum stop loss of 1.09, but the target could be as low as 1.06, and then eventually 1.05.
- Anything underneath the 1.05 level would have me adding to the position, and aiming for parity, although that is not my base case scenario.
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