The Euro continues to see a lot of noise, but the potential for the Iranians to look for peace is going to be a major driver of risk appetite.
EUR/USD
The Euro has continued to see a lot of volatility on Tuesday as traders are just simply trading the latest headline in the war between the United States and Iran. It was released late in the day that the Iranians were ready to end the war, but they wanted certain guarantees. Whether or not that ends up being something that the United States agrees to remains to be seen, but clearly this has thrown risk appetite back into the market.
We’ve Been Fooled Before
With that being the case, I think you have to look at this very cautiously because quite frankly, we've been fooled so many times now that the market simply cannot trust the latest headline. In fact, I would venture to say there's probably a serious lack of volume at this juncture as traders continue to get burnt on every headline. The 1.16 level I believe continues to be a difficult barrier to overcome and I will be watching that level very closely to see whether or not we can get above it. If we can, it opens up an attack on the 50-day EMA. That being said, it's worth noting that the 200-day EMA is near that crucial 1.15 level, so I don't know that we just simply fly through it.
Yields of course will continue to be one of the biggest movers of markets which are directly influenced by those headlines, so be cautious of that. I also see an environment where traders will probably continue to hang on every word coming out of Washington D.C. or Tehran and in this environment, it's difficult to put a big position on. Quite frankly, I think you have to be very cautious because all it would take is one wrong message and the whole thing comes unraveled.