- The EUR/USD has rallied a bit during the trading session on Tuesday, as we continue to hang around just above the 1.06 level.
- This is an area that of course is important, as it is a large, round, psychologically significant figure, and an area that has been important in the last couple of trading sessions.
- At this point, the market is starting to lose volume, as traders are starting to worry more about the holiday season than anything else.
The 50-Day EMA underneath continues to offer a bit of interest, but quite frankly this point in time I think we get a situation where it’s about to cross the 200-Day EMA and get people excited. Do not get me wrong, I don’t necessarily buy into the whole idea of the “golden cross” being anything other than a signal to start buying far too late, but I also recognize that there are some who do. Because of this, they could offer a bit of a “floor in the market” closer to the 1.04 level underneath. That’s an area that has been important a couple of times, so it all ties together quite nicely as a potential area of buying pressure.
There Are a Lot of Liquidity Issues
It’s worth noting that the Bank of Japan surprised the Forex markets overnight by suggesting that the interest rate will now be allowed to float all the way to the 0.50 level, and now we have a massive unwind in the USD/JPY pair. That could have a bit of a “knock-on effect” in other Forex pairs, but eventually, things will start to equalize.
On the upside, if we break above the 1.08 level, it’s likely that this market could really start to take off, perhaps reaching all the way to the 1.10 level. In that scenario, we have a situation where the trend will start to look longer-term, as traders will have cleared a lot of psychological barriers in the meantime. Because of this, you could see a rush into the Euro, but right now I think it’s a little premature to expect that. This is especially true considering we are during the holiday season. Know there are a lot of liquidity issues out there, and therefore moves could be sudden.
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