More likely than not, we will see the overall upward trend continue, with an eye on the 1.40 level as a potential target.
A break above the 1.3650 level would snap the back of the shooting star from the Monday session, suggesting that a lot of the downward pressure is gone. Beyond that, we also have the Federal Reserve statement on Wednesday that will have a major influence as to what happens next. Keep in mind that the JOLTS announcement came out during the day on Tuesday, showing that there are over 10 million unfilled positions in the United States. If employment remains a major concern, inflation is almost certain to follow. Because of this, the Federal Reserve has no opportunity to ease anytime soon, despite what Wall Street may beg for.
The one thing that could work against the value of this pair is crude oil, but time will tell whether that will be enough to reverse the trend. If we broke down below the 1.3450 level, then I believe we would probably have some type of significant pullback. At that move, I would anticipate that we could go down to the 200-Day EMA.
More likely than not, we will see the overall upward trend continue, with an eye on the 1.40 level as a potential target. I do think that there is a lot of noise between here and there, and therefore it’s likely that we will see more choppy and sideways behavior than anything else, perhaps hanging around in a 500 PIP range. If we break above the 1.40 level, then it’s likely that we go much higher, opening the 1.4250 level, and then the 1.45 level after that. Keep in mind that the Bank of Canada recently raised interest rates less than anticipated, so that does show that the Fed is more likely than not going to remain more aggressive than the BOC.
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