- The EUR/USD has gone back and forth during the session on Wednesday, as we continue to hang around this overall area.
- After all, the 1.06 level underneath is an area that is relatively psychologically important, as well as an area where we’ve seen a lot of noise in the past.
- Because of this, I think it does make a lot of sense that you step to the side and let the market work itself out between now and January 1, as well as the job number that comes out later that week.
- In fact, the Non-Farm Payroll number is probably the first significant piece of noise that we will get.
If we break down below the 1.06 level, then it’s likely that the market could open a move down to the 200-Day EMA, which is near the 1.04 level. The 1.04 level is an area that has been important in the past, and it is probably worth noting that the area also features the 50-Day EMA, perhaps getting ready to form the so-called “golden cross.” I think this is a nonsensical indication of where the market is going, but there are no people out there that are believing in it that it’s worth paying attention to just because of that.
Waiting for a Deep Correction
If we break down below the 1.06 level, I think it is not only because the market is down to those moving averages. It could open the possibility of an even deeper correction, especially as we are sitting during a very negative global outlook, so that comes into the picture as well. Furthermore, the Federal Reserve continues to talk about how is going to remain tight much longer than anticipated, so that is something to keep in mind as well.
On the other side of the coin, we have the ECB, which says that it is going to remain tight, and it does, of course, must fight inflation, but at the end of the day, the European economy is much softer than the US economy, so I think it’s only a matter of time before the Euro suffers at the hands of sellers. This has been an impressive turnaround, but unless the Federal Reserve softens that stance sometime soon, it’s difficult to imagine that the longer-term move is still to the upside.
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