The Euro has rallied a bit to kick off the week, breaking above the 1.05 level. However, we have given back quite a bit of the gain as we continue to see more malaise in this market. That being said, it’s also worth noting that it was Juneteenth in the United States, therefore you need to understand that a certain amount of liquidity is going to be missing. After all, the large banks in New York were closed.
1.06 level above will offer resistance, right along with the 50 Day EMA which is sloping toward it right now. I think this is a scenario where it’s only a matter of time before we can start shorting again, as the market will test the previous “double bottom” near the 1.04 level. The economic situation and fundamental situation both favor the US dollar, so at this point, I have no interest in buying this pair, but I would have to stand up and take notice if we were to turn around a break above the 1.08 level. We are light years away from there, so I’m not necessarily overly concerned about the upside. The market breaking below the 1.04 level is something that I expect to see sometime in the next several weeks.
The Federal Reserve is going to continue to tighten, and the European Central Bank has recently had an “emergency meeting” to discuss Italian bond yields. In other words, it’s very likely that they will be a bit looser in the future, just after talking about being hawkish. Because of this, I think that this is a “fade the rally” type of market and will continue to be going forward. I have no interest in buying the Euro anytime soon unless of course, the Federal Reserve decided to pivot.
I do expect the Federal Reserve to pivot eventually, but they have already suggested that the next two meetings are going to have 50 basis point hikes, so it’s going to be more like the end of the summer where we may start to see “cracks in the ice.” In that scenario, we may get a nice opportunity by the Euro at extraordinarily low levels, especially if the Europeans have already fought inflation and were starting to see it dissipate a bit. If that’s the case, we could really see a big move to the upside, down the road.