- During my daily analysis of the EUR/USD pair, the first thing that I notice is the fact that we have bounce from a crucial large, round, psychologically significant figure in the form of the 1.05 handle.
- This is an area that’s been important multiple times, so I think you need to be cognizant of this potential floor, as it’s possible that we could see the market try to make a big stand here.
Regardless, it’s obvious that the euro is oversold against the greenback, and I can make an argument that the greenback is overbought against almost everything else as well. With that being said, the market is likely to continue to see a lot of US dollar strengthen over the longer term, but in the short term I do think that little bit of a bounce makes quite a bit of sense. In fact, we could bounce all the way to the 1.0750 level without changing much in this pair.
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Interest Rates
Interest rates in America continue to skyrocket, and that of course makes the US dollar much stronger. Furthermore, there are a lot of questions to be asked about the US economy, but with a new pro-business administration taking the reins of power in a clean sweep of not only the White House, but also the House of Representatives, Senate, and still holding the Supreme Court, it’s very likely that we will see a potential revival of the 1980s, which had seen the American economy take off quite drastically.
All things being equal, most things American have performed quite well over the last several weeks, culminating with a bit of euphoria after the election. Nonetheless, nothing goes in the same direction forever and I think that’s what we are seeing here. Would I be bullish of the euro overall against the US dollar? No, not at all. However, I do think that we had gotten so far ahead of ourselves that a bounce was almost necessary.
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