- The euro dropped a bit during the early hours on Tuesday, and as you can see, we look likely to continue to go down to the 1.03 level.
- The 1.03 level is an area that has been important multiple times.
- But the question now is, can we break through it? If so, things get clearer.
If the market were to break down through the 1.03 level with any type of strength or a daily close, then it could open up the possibility of a move down to the 1.02 level, or possibly even the parity level. Short-term rallies at this point in time will continue to see signs of exhaustion get faded from everything I see.
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I do think that the 1.06 level will continue to be a short-term resistance barrier. In general, this is a market that I think is likely to continue to see the US dollar pick up demand, mainly due to the interest rates in America rising, while Europe has at least two countries where the governments are falling apart, and of course, the economic numbers out of Europe are somewhat dire.
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Furthermore, the European Central Bank is expected to cut several times next year, while the Federal Reserve may cut once or twice. But it looks a little bit more hawkish from the central bank of America than it does out of the EU. So as long as that's going to be the case, it does make sense that people want to own dollars and not euros.
Furthermore, when you look at other currency pairs, the euro looks miserable against most. So, with all of that being said, I think you continue to see dollar strength, and you continue to see rallies that fail to attract more short sellers. I’d fade rallies every time I get the chance in this EUR/USD pair.
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