Markets are currently trying to price in the idea that the Federal Reserve will have to change its monetary policy, while the ECB remains hawkish.
- The EUR/USD rallied during Thursday’s trading session, as the market is trying to fend off any potential US dollar strength.
- The market has broken above the 1.10 level, and it’s currently sitting near the recent high, which raises the question of whether we are going to have a double top or not.
- The next 24 hours are crucial to determine the longer-term direction of the market. If the market breaks above the recent high, then we could see a move higher toward the 1.1250 level, and possibly even the 1.15 level.
- However, if the market breaks down from here, then it will most likely revisit the 1.08 level. Adding more fuel to the fire on the upside momentum, PPI numbers in the United States slowed down again.
Markets are currently trying to price in the idea that the Federal Reserve will have to change its monetary policy, while the ECB remains hawkish. This could potentially lead to a move higher in the Euro, but it’s uncertain whether it will last in the current economic environment. The inflation situation in the United States is slowing down, but it still has a long way to go before falling within historical norms. This means that the Fed will likely continue to be tight going forward, which we need to consider when looking at the market.
We need to approach the market from two different perspectives. Firstly, we need to determine whether the Federal Reserve can continue to raise rates, and whether they sound hawkish. The financial world is expecting the Federal Reserve to bail everyone out now that there are some banking issues. However, even if that were the case, it might put some downward pressure on the Euro as people go running to the dollar for safety after the initial selloff. Secondly, we need to follow the momentum of the market as it has run more on momentum than anything else recently. Expect volatility to continue and be cautious with your position size.
In conclusion, the Euro is trying to fight off any potential US dollar strength, and the market has broken above the 1.10 level. The next 24 hours are crucial to determine the longer-term direction of the market, and we need to consider whether the Federal Reserve can continue to raise rates and sound hawkish, as well as follow the market momentum. Expect volatility to continue and be cautious with your position size.