- The EUR/USD has fallen again during the trading session on Monday as we continue to see a bit of hesitation from the 1.0350 region, and of course the 200-Day EMA.
- The market pulling back from this indicator suggests that we are not ready to break out quite yet, as there will continue to be a lot of pressure on the Euro due to the dire financial situation that the European Union finds itself in.
Quite frankly, the only reason this market has rallied has to do more with the Federal Reserve possibly slowing down than anything that the European Union offers. Yes, the European Central Bank has suggested that it is going to get a little bit tighter, but at the end of the day the Europeans have a whole host of problems that the Americans simply do not have. The big deal is going to be the fact that the European Union will have to worry about a lack of energy, and once December 5 comes and goes, then you must worry about the ban on Russian oil as well. Ultimately, this is a scenario where things are probably not going to be easy to deal with, and I do think that the Europeans will eventually see their currency depreciated.
Choppiness Ahead
Keep in mind that this has been a very nice recovery, but at the end of the day, the 200-Day EMA is something that a lot of traders will pay close attention to, and it’s likely that the algorithmic traders have gotten involved. Longer term, the US dollar looks much stronger not only from an interest rate differential perspective but the fact that the US economy itself is stronger. In fact, there are some out there that are suggesting that the market is going to start focusing on the underlying economies, and if that’s the case, there’s absolutely no argument to be made for the Euro.
Obviously, we will have a lot of choppy behavior from time to time, and of course, traders will be out there paying close attention to the latest speeches from Federal Reserve members, trying to figure out exactly what it is the Fed is going to do. At this point, most market participants believe that the Federal Reserve will be raised by 50 basis points in December. However, there is still a certain amount of an argument to be made for 75.
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