From a fundamental standpoint, the Euro has no business rallying, but clearly the market is already trying to push the Federal Reserve to do what it wants, as they are looking for that never-ending liquidity.
The EUR/USD rallied initially during the trading session on Monday but gave back gains rather quickly as we continue to see the 1.06 level cause some issues. Furthermore, we have a lot of noise coming this week that will directly influence where this pair goes next.
On Tuesday, we have the Consumer Price Index number coming out of the United States, which will obviously have people paying close attention to inflation. Inflation has been the main driver of trading for a while now, and I do not expect that to change anytime soon. Because of this, I believe that we have a situation where the market probably needs to absorb a bit of this information over the next couple of days to make a bigger decision.
On Wednesday, we have the Federal Reserve interest rate decision and statement.This will be one of the 2 major drivers of this pair this week, because on Thursday we have the European Central Bank stepping into the 48, causing a bit of volatility with the interest rate decision.Ultimately, I think this is a situation where you are going to see a lot of noise, but at the end of the day, we will more likely than not make a sudden move, and then just drop dead for the rest of the year. I fully anticipate that the little quiddity is going to disappear over the next couple of weeks, and therefore you must look at it through the prism of risk.Is it worth risking your account for the potentially erratic moves at the end of the year as outsized reactions to news events would be common? I suspect that is not going to be the case, but you never know.
If we break above the 1.06 level on a daily close, then the Euro could go looking to the 1.08 level, but if we break down below the 200-Day EMA, I fully anticipate that the downtrend will continue. From a fundamental standpoint, the Euro has no business rallying, but clearly, the market is already trying to push the Federal Reserve to do what it wants, as they are looking for that never-ending liquidity. With that in mind, expect a noisy couple of days but at the end of the week, I think we will get our truth.
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