- The EUR/USD has rallied just a bit during the trading session on Tuesday, after initially trying to break down. It should probably be noted that there was a sudden turnaround in the middle of the New York trading session where everybody went “risk on.”
- That being said, the market is likely to continue seeing a lot of downward pressure, but it does not mean that we go straight down.
- After all, when you look at the longer-term chart you can see that the 50-Day EMA has served as a bit of a downtrend line, and it looks to me like that should continue to be the case.
At this point, the 50-Day EMA is breaking down below parity, setting up a major showdown near the parity level, assuming that we even get there. Keep in mind that we have a couple of inflation numbers coming this week, with the CPI being on Thursday and more likely than not being the main headline for the week. That being said, the market could draft for a bit over the next day or two, waiting for that significant fundamental announcement. After all, everybody is waiting to see whether or not the Federal Reserve is going to be forced to remain very tight. The biggest problem we have right now is there is an entire generation of traders that have been raised on liquidity, and therefore anytime somebody says something even remotely not hawkish, the market starts looking for the Federal Reserve to pivot again.
The economy is in Danger
I think what most people don’t understand is that the economy is in much more danger than being reported. After all, the leverage alone in the system is a disaster just waiting to happen. Furthermore, you have the European Union that is going to be struggling to find enough energy for the winter, and that does not bode well for the overall European economy. To think that the European Central Bank has even the slightest ability to tight monetary policy for a serious run is a joke, and if those inflation numbers come in hotter than anticipated, we could see the US dollar take off yet again. I think that’s more likely than not going to be the case, but the next day or two people might be a bit cautious so that sets up kind of a drifting listless type of market.
Ready to trade our Forex analysis today? We’ve made a list of the best brokers to trade Forex worth using.