- During the trading session on Monday, we saw it the EUR/USD pair break above the 1.09 level again.
- This is a situation that continues to see traders favor the euro, as the German bond yields have been climbing.
- As long as that ends up being the case, then it makes quite a bit of sense that we will see the euro a bit more attractive than the US dollar.
All that being said, the reality is that the FOMC meeting is this week, and the press conference. In other words, we could see Jerome Powell say something to rock the markets, as he has a poor record of calming them down. Furthermore, the numbers coming out the United States as far as the economy is concerned it do favor the idea of a cooling US economy, so it all ties together quite nicely. That being said, there’s also some things that you need to think about going forward.
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While Europe is coming out of a recession, if the United States goes into one, this will almost certainly influence the rest of the world as it typically has in the past. If it does, we could see the US dollar be a big beneficiary of the overall flight to quality. That happens quite a bit, so the question I have at this point is how much longer does this rally has to go? I do think that we could go to the 1.10 level in the short term but getting above there might be a little bit difficult based on the noisy behavior in the past. If we do, then the 1.12 level is my next target.
On the downside, if the market were to break down, then the 1.08 level being broken below would be a major negative turn of events. At that point, we could go looking to the 200 Day EMA, closer to the 1.0675 level. While I don’t expect that to happen in the short term, it is the possible negative trade that could appear.
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