- The EUR/USD tried to rally initially during the trading session on Friday, but it looks as if parity is going to hold as resistance. It’s worth noting that the market continues to pay close attention to the Federal Reserve, and of course, we have a major interest rate decision coming out on Wednesday.
- The Federal Reserve will decide whether it’s going to raise interest rates 75 basis points or not, and most people believe that they will.
- However, there are some out there that are already starting to call for only 50 basis points.
However, the real decision to be based on is going to be how they put out the statement. If the statement is rather hawkish, then it will send this pair much lower, as the US dollar should strengthen. I anticipate that the markets will continue to be very noisy, and quite frankly I don’t like the idea of owning the Euro, even though the ECB just raised interest rates. After all, they can only do so much, and the reality is that the boost that the market got from the ECB raising rates has already been wiped out.
Looking to Fade Rallies
The 50-Day EMA sits just below, and I think a lot of people will be paying close attention to it. If we were to break it down below it, then I think the market will continue to go lower, perhaps reaching the 0.99 level first, followed by the 0.98 level. Anything below there opens the possibility of revisiting the lows again, near the 0.95 level. Obviously, breaking down below that would be extraordinarily perishing could send this market plummeting.
On the upside, if we can take out the highs of the last couple of days it’s possible that the Euro could go looking to the 1.03 level, but we need to see the Federal Reserve be dovish enough to make that happen. I just don’t see how it does, so therefore I think it’s probably going to be a situation where we will be fading the rallies soon enough. Nonetheless, a little bit of patience probably goes a long way in this pseudo-ridiculous environment that we find ourselves trading. Ultimately, I still favor the downside, at least until we get through the Federal Reserve meeting and whatever the fallout is from that.
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