The EUR/USD initially fell during the trading session on Monday, but then turned around to show signs of life again. The market looks as if it’s trying to squeeze to the outside, perhaps based upon the nonsensical hope coming out of Wall Street that the Federal Reserve is either going to pivot soon, or they are going to at least pause. There is 75 basis points expected in rate hikes coming November from the United States, but there are people out there already looking for the pivot in the next few months.
That’s complete nonsense, and the Federal Reserve will be the first people to tell you this. However, this is the market that we are dealing with, and it seems like we are at least going to see that play out in the currency market to one degree or another.
I think this is going to end up being a nice shorting opportunity, but we just don’t have the price action yet.The 50-Day EMA is sitting just above, right along with the overall downtrend line.Beyond that, you also have parity right after that, so I think that’s something that a lot of people would be paying attention to as well.
If and when we finally break above parity, then it’s likely that we could get a bigger bear market rally, but at this point in time it’s likely that we will see exhaustion given enough time, and that exhaustion is exactly what I would be jumping on for a bigger move. In the short term, it’s very much the same type of set up, but you need to keep in mind that we are in an area of intense consolidation, but there are a lot of different reasons to think that the European Union is going to continue to struggle.
There are a lot of bad signals coming out of the European Union, and at this point everybody is just hoping that the Fed will come in and save everybody. The European Union has to worry about energy this winter, which is something that the Americans will not have to worry about because of this, I think unless something changes fundamentally, sooner or later that Euro is going to drop to the lows again, and perhaps even lower than previously seen.