The EUR/USD initially tried to rally during Tuesday's trading session but showed signs of hesitation as the market appears to be overstretched. However, traders should be cautious when considering shorting the market as the uptrend in the Euro is expected to continue.
At this point, there is a lot of noise waiting to happen in the market, and therefore, traders should expect a lot of consolidation. The 1.09 level is expected to offer support to the Euro market, and the 50-Day EMA is seen as a potential source of support. "Buying on the dips" is how most traders look at the market, and therefore, traders are advised to be cautious about shorting the market at this time.
If the market breaks down below the 50-Day EMA, it could become a potential shorting opportunity. However, this is not an immediate concern, and traders should remain cautious when considering any potential short positions. The Euro market is considered overbought, and therefore, traders should expect consolidation in the coming weeks and months.
Volatility Ahead
- On the upside, the 1.1050 level is seen as a major resistance barrier.
- If the market breaks above this level, it could be very bullish for the Euro and very negative for the US dollar in general.
- This could lead to questions about risk appetite and whether the market is headed straight up.
The European Central Bank is expected to remain very hawkish, while the Federal Reserve is getting closer to the end of its rate hiking cycle. As such, traders should look for opportunities to buy on the dip. If the market breaks prices down below the 1.08 level, it could lead to a sudden influx of US dollar strength.
Overall, the EUR/USD market is expected to remain volatile in the coming weeks and months. Traders should proceed with caution when considering investments in the market and should be aware of potential risks and rewards. While there may be opportunities for profit in the market, it is important to remain vigilant and to proceed with caution. The best way I can think of is to keep your sizing somewhat smaller than usual, as the choppy behavior could breed a lot of losses if you aren’t careful. The market seems to be looking for a reason to move now.
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