- During the trading session on Tuesday, we have seen even more bullish pressure for the euro, as yields in Germany continue to climb.
- As long as that is going to be the case, it makes the euro a bit more attractive than the US dollar, which people are starting to price in the idea of a handful of trust rate cuts this year.
- Looking at the CME FedWatch tool, you can see the traders around the world expect the Federal Reserve to cut interest rates 3 times between now and the end of the year, which of course would catch the attention of most traders.
That being said, it’s probably worth noting that the inflation situation in the United States is likely to return between now and then, so I think the market may be somewhat disappointed. However, in the short term you have to follow momentum and where the bond markets are going, and right now it looks like it favors the euro. Granted, we are extraordinarily overbought at this point in time, and you simply cannot buy the euro at this elevated level without asking for some kind of trouble.
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Technical Analysis
Pretty much no matter how you look at this chart, the euro is overbought. We are light years above the 200 Day EMA almost instantly, and while that is of course a bullish sign, it’s also assigned that perhaps the market has gotten far too ahead of itself. Because of this, you have to be cautious with the idea of chasing the euro at this level, but if we get some type of short-term pullback, the 1.08 level could very well be an area of importance as far as support is concerned. If we were to break down below that level, then you could be looking at the market dropping all the way down to the 200 Day EMA, near the 1.0650 level, and still looking bullish. As far as chasing is concerned, I think you’re asking for trouble if you are going to be buying all the way up here
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