- The Euro rallied slightly in the early hours on Tuesday as we have now reached the 50 day EMA.
- All things being equal, this is a market that I think continues to see a lot of back and forth, but ultimately, we are essentially near the middle of the overall consolidation area, and I think you need to look at it through that prism.
- In other words, there may or may not be much to do - depending on your time frame.
Essentially, we're at fair value, and with a serious lack of economic announcements for most of the week, I think we're just going to kind of drift around in this area. The 1.10 level above is massive resistance, while the 1.07 level underneath is massive support. As we are in the middle, I think the only thing you can do is take a look at this through the prism of some type of short-term range-bound trading if you are inclined to be a scalper.
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One thing that I do use the EUR/USD pair for in times like this is simply a proxy for the US dollar. What is this pair doing? And what does that mean about the US dollar strength or weakness in other currency pairs? Right now, it looks pretty balanced, so I think we continue to be somewhat range bound in most pairs. There are a few out there that are going to be behaving a little differently, such as the yen and the Swiss franc, which of course have very loose monetary policy and no real chance of tightening.
That being said, market participants in this pair will just simply look at short-term moves back and forth, perhaps employing some type of range-bound system to take advantage of the particular setup. This is probably going to be the way this market behaves for some time this year, barring some kind of massive “risk off” situation, which would most certainly favor the downside, while a massive “risk on event” would have the euro rallying against the greenback.
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