- EUR/USD pushes higher but faces notable resistance, with broader direction likely hinging on next week’s FOMC decision.
- Diverging economic trajectories between the U.S. and Europe continue to favor dollar strength on larger pullbacks.
The euro has seen another push higher during the trading session on Wednesday, but it does look like a market that I think is running into a little bit of a resistance barrier. In the short term, I suspect that the euro will probably continue to at least attempt to recover.
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But in the longer term, a lot of this is going to come down to the fact that the United States will expand and grow next year, while Europe probably won’t or at least will in a much smaller manner than the American economy.
FOMC as the Next Major Driver
So with that being said, I'm looking at little rallies like this as opportunities to short, but I also recognize that right now we're waiting on the FOMC.interest rate decision next Wednesday, and probably more importantly, the press conference afterwards. So that is going to be the next major driver, would be my guess, because if Jerome Powell suddenly sounds extraordinarily dovish, that will send this pair to the moon. But some of the leading indicators are starting to suggest that maybe massive rate cuts just aren't going to be coming. And if that's the case, then you've got a situation where the US dollar will eventually strengthen.
If we break down below the 1.14 level, this is a market that I think could really take off to the downside, reaching the 1.11 level. Keep in mind that the Euro against the US dollar is typically a very choppy and slow place to be. So even getting to 1.11 might take a couple of weeks. This is a market right now that's just kind of searching for an external force to move it.
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