The euro rose against the tide this morning, as yields in the US have eased a bit – despite higher inflation readings. This is a market that continues to offer selling opportunities from what I see.
EUR/USD
The euro has rallied a bit during the trading session on Thursday as interest rates in the United States have dropped a bit, suggesting that the Federal Reserve may be a little looser with monetary policy than thought, which is odd considering that CPI and PPI numbers over the last 24 hours have both been hotter than anticipated.
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Rallies at this point in time still end up being selling opportunities from what I can see.
This might just be a simple relief rally, and it's worth noting that there are other forces at play here. French debt continues to be a major problem, and as long as that's going to be the case, then the euro does have a little bit of a shadow hanging over it. This is what I think will remain an important factor.
With the 1.1250 level being particularly interesting, right along with the 1.1350 level, I'm looking for signs of exhaustion that I can start shorting again, but that probably does not occur until we start to see U.S. yields really fall apart.
It's been pretty brutal to the downside over the last couple of days in the yield situation, but let's be honest here, we've seen this before, and the euro is simply oversold. So, in this environment, I think a bounce makes sense. I've kind of been waiting for it, and we've got it.
I think it's got limited upside as things stand right now, so a little bit of patience and waiting for signs of that exhaustion are how I'm playing this market to take advantage of U.S. dollar strength.
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