- The Euro has gone back and forth during the trading session on Tuesday as we continue to see the Euro threaten a massive breakout above the 1.0950 level.
- This is a market that continues to stretch higher, mainly based on interest rate differential.
- But on Wednesday, we get the FOMC announcement and more importantly, the press conference, that could determine where the next 200 pips come from.
In the next 24 hours, I’d be very careful about trading this pair, but once Powell gives his press conference, and he will cause some type of chaos, he just can’t seem to help himself, if the euro shoots higher, then the 1.12 level is your target. If it breaks down and it blows below the 1.08 level, all bets are off, and we could drop another 200 pips from there.
Volatility Continues?
I think the market is that volatile at the moment. German bond yields have accelerated recently, mainly due to the idea that Germany is going to start spending recklessly and therefore they are going to have to pay higher interest rates for that. That helps the currency, at least for a while. Eventually that causes a big problem in Germany and then you will see the euro fall just as fast as it has risen. This is a short-term trade, short-term duration of maybe a couple of months, longer term, I don’t think this plays out well for the euro. But right now, you could very easily see it go to the 1.12 level, so there’s no point in fighting it. When you look at it, that would just be the top of the range that we’ve been in for basically two and a half years now almost.
So, at the end of the day, I think that’s what we’re trying to feel out here, whether or not we can reach the top of that range. And if we do, I’ll revisit it there. But right now, this looks like a market’s just hanging out, waiting to see what Jerome Powell has to say.
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