Euro Grinds Back and Forth

Keep in mind that the interest rate differential between the European Union and the United States will continue to drive this pair lower.

The euro went back and forth on Monday as we continue to respect the 1.05 level as support. At this point, the market looks as if it is trying to find some reason to move in one direction or the other and simply has not had it yet. One thing is for sure, there does seem to be a lot of noisy behavior in general.

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If we were to break above the 1.06 level, then it is obvious that we would have a little bit of bullish pressure to push this market higher, perhaps opening up the possibility of a move to the 1.08 level. The 1.08 level is a significant area that we had broken through previously. That was massive support before, and it should now offer resistance based on “market memory.” Furthermore, the 50-day EMA is racing towards that area, offering even more in the way of dynamic resistance. If we can break through all of that, I might consider buying on some type of reversal for a longer-term move.

The market breaking down below the 1.05 level could send this market much lower, perhaps grinding down to the 1.03 level. There is a lot of noise between the 1.05 and the 1.03 level, so expected to be more of a grind to the downside more than anything else. I think more likely than not we will see short-term rallies that offer selling opportunities as well, as the US dollar is favored over almost everything in this environment. The candlestick for the day is neutral, just as we had seen during the Friday session. This is a situation where we are killing time more than anything else, so I think it is only a matter of time before we get a longer-term signal.

Keep in mind that the interest rate differential between the European Union and the United States will continue to drive this pair lower, and of course, the differentials in attitudes between the central banks will continue to favor the greenback as well. The European Union has a lot to think about at this point, like the war, inflation, and slowing growth all weigh upon the central bank. On the other hand, the Federal Reserve is sticking with the “fighting the inflation” game plan.