- The EUR/USD has fallen again during the trading session on Thursday as we breached the 0.98 level.
- The 50-Day EMA above has offered significant resistance, and it’s worth noting that it is sitting right at the parity level.
- Furthermore, the 50-Day EMA has been functioning as a downtrend line, so a lot of people have been paying attention to that as well.
- Because of this, I think it is probably only a matter of time before we see rallies get sold into.
The Non-Farm Payroll announcement coming out on Friday will have a huge influence on what happens next, as it will give us an idea as to where the US dollar is going to be moving. At this point, I like the idea of shorting rallies that show the first signs of exhaustion, or just simply selling here and hanging on for the ride lower. After all, the US dollar is going to continue to be crucial, and important. The world is short of US dollars, so it does make quite a bit of sense that we would continue to see this market drift lower.
Waiting for a “Fade the Rally” Set Up
Furthermore, you also must keep in mind that the European Union has a major energy crisis coming, which is threatening to shut down the entire economy. If that’s going to be the case, then it’s difficult to imagine a scenario where the European economy warrants a stronger currency, and of course, there is almost no chance that the European Central Bank can be aggressive in its monetary policy. Ultimately, I think this is a situation where you have a “fade the rally” type of setup.
If we get anywhere near parity, I’m willing to have a short position put on, but I would not necessarily get aggressive with it. I recognize that there will be a lot of noisy behavior right after the announcement, but at the end of the day, I think is probably only a matter of time before we see the US dollar pick up momentum. If the interest rate situation in America continues to get tight, that is yet another reason to think that this pair drops. In fact, unless the Federal Reserve pivots, I have no interest whatsoever in buying this market. The market looks as if it is going to try to reach the lows again.
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