- The euro has bounced a bit during the early hours on Thursday as we continue to try to find some type of stability.
- After all, we had a major selloff during the Tuesday session after the surprise CPI numbers in the United States, but we have also had very weak retail sales numbers early on Thursday that could drive the value the US dollar back down.
- All things being equal, I think this is a scenario that you have to pay close attention to, because there are a lot of technical things going on in the same region.
Technical Analysis
The most important thing that I see at the moment is the 200-Day exponential moving average which currently sits just above the trading range that we are in. That would be at roughly 1.08, which of course is also a large, round, psychologically significant number that people will be paying attention to. The 50-Day EMA is starting to fall and reach toward that level, but we do not have the crossover quite yet. The 1.0750 level is also an area that previously had been major support, so I do think that it is a bit of a magnet for price. Underneath that we have the 1.07 level, which is a large, round, psychologically significant figure as well, and an area that I think if we were to break down below it, probably opens up quite a bit of selling pressure for the EUR/USD pair.
Pay attention to interest rates in the United States, as falling interest rates will help propel the euro as it is considered to be the “anti-dollar.” All things being equal, this is a market that probably remains somewhat sideways, which is typically how this pair behaves. Furthermore, I do believe that sometime during this year we will substantiate a larger consolidation area that we will bounce around in, as both central banks will more likely than not be loose with their monetary policy later this year as Germany is in a recession, and the Federal Reserve claims that inflation is heading in the right direction in the United States. In other words, I think both of these currencies will start to soften later this year, and therefore cause a bit of confusion in this market. Ultimately, I’m very neutral on this market but I do recognize that short-term traders will probably benefit from scalping it.
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