- During Monday's trading session, the EUR/USD currency pair fell to touch the 200-Day EMA, but it bounced back to show signs of life and now threatens the 1.06 level.
- It will be interesting to see if this level is reached, given the significant downward pressure on major currencies that are not the US dollar.
- The US dollar is climbing higher due to the struggles with risk appetite and the fact that interest rates on the 2-year yield in America continue to rise despite Wall Street's belief that the Federal Reserve will eventually bail them out.
Watch Out for Euro's Fundamentals
The Euro has its own issues, including significant headwinds in the economy and a certain amount of inflation. However, the Euro is not ready to go down without a fight, and Christine Lagarde has repeatedly stated that an inflation target of 2% is crucial, which has helped support the market.
Nonetheless, if there is continued negativity in terms of risk appetite, the Euro is likely to sell off again. If the market breaks down below the 200-Day EMA, the 1.05 level will be targeted, and anything below that opens up the possibility of a move to the 1.04 and 1.0250 levels. The parity level is also a possibility, which could be a noisy affair due to the level of attention it will attract.
On the other hand, breaking above the 1.07 level would open up the potential for a move to the 1.08 level. However, this level marks where the massive selloff began a couple of weeks ago, and as long as the fundamental situation remains the same, rallies are more likely to be sold into.
Overall, the outlook for the Euro is bearish, and it is likely to face significant downward pressure in the near future. The ongoing struggles with risk appetite and inflation in the economy will likely continue to weigh on the currency, and it will face stiff resistance as it attempts to climb higher. Traders should be prepared for significant volatility and choppy trading in the near future as the market tries to find direction. Keep your position size reasonable as the market will more likely than not be very difficult to navigate over the next couple of days, and at this point in time I think fading rallies will more likely than not continue to be the best opportunities you have, but you should also keep in mind that extended moves are probably less likely to occur.
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