- The Euro made a strong start to the trading session on Monday, but it appears that there will be a lot of activity around the 200-day moving average above.
- We could aim for the 1.09 level if we are able to break over that. Because of the heavy traffic in this area, I don't think it would be simple to go past it without a significant "risk on scenario" or a fundamental change in economic indicators.
- Because of this, I think you need to dampen your expectations of bigger moves in this pair.
If all else is equal, I believe there is a lot of noise in this market right now. I therefore predict that there will almost certainly be a lot of choppiness in this situation. As support, we have the 1.07 level below, and a break below that would probably take us to the 1.05 level as well.
Since both central banks are probably going to have to loosen their monetary policies, I believe there is a lot of noise in this situation overall. That probably continues to be the case as there just simply is no compelling argument for one currency over the other at the moment, but that could of course change rather quickly if we get some type of fundamental shift in attitude or interest rate policy coming out of the either central bank.
Similar Central Bank Trajectories
Given that both of them are in this situation, the US dollar won't actually benefit much later this year unless there is a monetary crisis of some kind or even just a slowdown in the world economy. Additionally, a component of 1.10 above is likely to be a major resistance level if we do break higher.
Let's break down below. I believe 1.05 would be challenging to get through. The U.S. dollar would only be starting to soar that high if we were to break below the 1.05 level, which would indicate a major financial catastrophe of some kind. This of course is something that we have seen a couple of times over the last few years, so it’s not out of the realm of possibility, but I don’t necessarily think that it’s something that we will see right away.
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