We’ve had the FOMC on Wednesday and now the ECB on Thursday give their assessment of their respective economies and interest rate decisions.
As a result, we now head back to normal trading.
Normal trading favors the market being somewhat range bound because the interest rate differential between the United States and Germany, which is the proxy for Europe, is only just over 1% so it’s not a massive interest rate differential. I think what we look at in this pair is probably more to do with how risk appetite is behaving. If risk appetite picks up a little bit you’ll see a little Euro strength and vice versa.
There are a lot of concerns about energy in Europe, so I think that keeps this somewhat range bound with the 1.1850 level above being a major barrier. If we were to break above there then maybe we could go quite a bit further, maybe to the 1.20 level, but as things stand right now, this is a market that I think has a little bit of upside and then probably selling pressure.
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Key Levels and Moving Averages
If we were to break down from here the 50-day EMA offered support over the last 4 or 5 trading sessions, so clearing that to the downside could be a significant shift. At that point, I would anticipate a drop towards the 200-day EMA, maybe even the 1.14 level.
I do not like taking big positions in the EUR/USD market and quite frankly I’m looking to fade the overall range between 1.1850 and 1.14. As things stand right now, you’re somewhat no man's land, but now that we are out of the way of the central banks we'll see if this upward trajectory continues. We have seen that in other pairs working against the US dollar.
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