- The euro has initially rallied a bit during the trading session on Tuesday, but it's worth noting that we are getting dangerously close to a major swing high at the 1.11 level, and in fact have already pulled back just a bit.
- Furthermore, the relative strength index is now in the overbought condition.
- So, it'll be interesting to see if we can continue to see this pair just go straight up in the air.
A Pullback Imminent?
I have a sneaking suspicion that we are in fact due for a bit of a pullback and we'll in fact see that happen sooner rather than later. This is not to say that we are going to see a major breakdown, just that momentum is a bit of a fickle thing and sooner or later traders will be looking to take some profit.
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We have the Jackson Hole Symposium going on this week and that of course will have a major influence on what's going on with the currencies around the world. And the markets will be paying attention to not only speeches by central bank governors, but for example, during Wednesday's session, the FOMC meeting minutes come into the picture, and then we get PMI numbers on Thursday from various countries. So, there is probably a certain amount profit-taking going on during the session. And this of course leads to a healthy market. You can't go in one direction forever. If we do get a pullback, the 1.10 level should be support. If we could continue to go higher, then the 1.1150 level would be the next target, followed by the 1.1250 level after that.
The one thing you can probably count on is that it is going to be very noisy and choppy, and with that being said, the market is likely to continue to focus on the Federal Reserve more than anything else, because it’s all about trying to get “Uncle Jerome” jumping into the market to save us all via liquidity.
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