- The EUR/USD has gone back and forth during trading on Monday, and even tried to rally a bit to break out, but at this point it looks as if it’s not going to be able to hang on to gain.
- That’s not a huge surprise, because the European Union is a disaster waiting to happen.
- The 0.98 level has been a bit of a barrier during the day, although we did break above it initially. It was a very short-lived rally, mainly based upon the Manufacturing PMI numbers coming out lower than anticipated in America.
This had people betting that there was the potential for the Federal Reserve to turn things around, but that’s a daydream at this point. At this point, we started to see traders come back into the market and short the Euro, because it has already been substantiated by the Federal Reserve that they are not worried about slowing the economy down, and in fact will be doing so by design. If they must fight inflation, the monetary policy is going to continue to get tight, and that is something that you need to pay close attention to.
Markets Looking to Pick Cheap Dollars
The parity level above will continue to cause headaches, and I believe it will essentially be the “ceiling in the market”, so I will look at it as such. If we were to break above the parity level, it would obviously be a major victory for the bulls, but I just don’t see an argument for that happening without the Federal Reserve stepping in and doing something. Granted, relief rallies can be brutal, and anything is possible, but right now it just does not look like a situation where we are going to see that happen easily.
Later in the day, we started to see more and more downward pressure on the Euro, and I think that will continue to be the theme here, that people are willing to short this market and are attracte to “cheap US dollars.” The overall attitude of the market remains pessimistic, so I just don’t see how you can bet against the US dollar anytime soon. This by its very nature will be a negative for the Euro, and therefore I believe that the upside is extraordinarily limited at this point.
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