The current rally may continue for a short while, but in the long term, the market will face resistance, and sellers will likely return to the market.
The Euro has experienced a significant rally during trading on Wednesday, reaching above the 50-Day EMA (Exponential Moving Average). This is an important indicator that often shows significant dynamic support or resistance. The fact that the Euro sliced through it is a very bullish sign. However, the Euro still needs to deal with the 1.07 level just above, which has been an important area multiple times before. In other words, the market is attempting to make a bigger move, but whether or not a move higher can stick is a completely different question due to the amount of noise in the market.
- Over the last couple of days, it appears that the 1.05 level underneath will provide support, which makes sense as it is now viewed as a floor in the market, at least in the short term.
- If the Euro were to break down below the 1.05 level, it’s possible that it could fall to the 1.03 level.
- It is important to note that the 1.05 level also has significant interest, not only due to the psychological standpoint of the large round figure but also because the 200-Day EMA sits right there as well.
The size of the candlestick is also significant, suggesting that there is quite a bit of bullish pressure, at least in the short term. However, when looking at the chart, it becomes apparent that the 1.08 level could very well be resistance, so we might continue to go a little higher, but there are doubts about whether or not we have enough momentum to go higher in the long term.
All things being equal, it’s only a matter of time before sellers come back into the market. The terminal interest rate in the United States is now well above 5%, while in the European Union, it is just over 4%. Therefore, it’s highly likely that sellers will return to the market, and I will do so as well when we show signs of exhaustion after a short term rally.
In conclusion, while the EUR/USD currency pair has rallied significantly, there are still challenges to overcome, and the market is faced with significant noise. The 1.07 level above and the 1.05 level underneath are both important areas to watch. The current rally may continue for a short while, but in the long term, the market will face resistance, and sellers will likely return to the market.
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