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I think it does make quite a bit of sense that will see sellers come in and push lower given enough time.
- The EUR/USD currency pair went back and forth Monday as we are hanging just above the 1.02 level.
- The 1.02 level has been important for several days in a row, as we have seen quite a bit of noise in the general vicinity.
- The candlestick for the trading session on Monday was very neutral looking, just as the several before it were.
- Because of this, I think it’s probably only a matter of time before the market has to make a bigger decision, and I suspect I know when that’s going to be.
Waiting on the Federal Reserve
There is a multitude of economic announcements this week, but it’s worth paying close attention to the Federal Reserve statement because it can give you a bit of a “heads up” as to where the US dollar may go. The US dollar obviously will be reacting to what Jerome Powell has to say about the forward direction, and where rates may go. Ultimately, the market is going to try to figure out where central banks are going, especially now that the ECB has surprised the market with a 50 basis point interest rate hike. That being said, they are light years behind the Federal Reserve, and it’s very likely that we will continue to see downward momentum over the longer term.
Keep in mind that the market also has a significant amount of resistance near the 1.04 level that it will have to deal with, as it was previous support. That “market memory” comes into play and should offer selling pressure. Beyond that, we also have the 50-day EMA that sits just above and is sloping lower, so I think it’s probably only a matter of time before the sellers would come in and punish the euro.
We also have to keep in mind that the European Union has to worry about things like energy. Quite frankly, an economy does not do well when it is struggling for energy. With this being the case, I think it does make quite a bit of sense that will see sellers come in and push lower given enough time. There are some delusions on Wall Street that the Federal Reserve might loosen quicker than we thought, but it is more likely that I’m going to be proven incorrect.
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