Gaps Higher to Kick Off the Week

The Euro’s future direction is uncertain as it faces resistance at the 1.0750 and 1.09 levels, with the possibility of a decline to the 50-Day EMA or even the 200-Day EMA. 

• The EUR/USD started the week with a gap higher, indicating bullish pressure in the trading session.
• However, the market struggled to break past the 1.0750 level and formed a shooting star pattern.
• A breakdown below this level could lead to filling the gap and reaching the 50-Day EMA, with the possibility of a further move down to the 200-Day EMA.

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If the Euro breaks below the 200-Day EMA, it could result in a significant decline in the currency, with the potential of reaching the 1.03 level or even down to parity. This level will attract a lot of headlines and order flow, making it crucial to keep a close eye on the market if it reaches that point. On the other hand, if the Euro manages to break above the top of the candlestick for the trading session on Monday, it could go up to the 1.09 level.

The 1.09 level is an essential technical indicator as it is where the 50% Fibonacci level occurs from the significant selloff during the previous run lower. This level will likely be defended by sellers, making it more challenging for the Euro to break through. Therefore, it is advisable to fade rallies as they occur in the Euro, especially with the Federal Reserve aiming to keep interest rates tighter for longer.

Jerome Powell, the Chairman of the Federal Reserve, has reiterated that viewpoint and suggested that interest rate hikes may need to come quicker than expected. This stance adds to the strength of the US dollar, making it more challenging for the Euro to appreciate.

However, the recent rally in the Euro does make sense, considering that it had fallen significantly, and the 200-Day EMA was defended by a double bottom. Nevertheless, the Euro remains a choppy pair, and there is more downward pressure on it.

The Euro’s future direction is uncertain as it faces resistance at the 1.0750 and 1.09 levels, with the possibility of a decline to the 50-Day EMA or even the 200-Day EMA. Fading rallies is advisable in the current market conditions, and keeping a close eye on the Federal Reserve’s interest rate decisions can provide insight into the Euro’s performance. Traders should remain cautious about the overall markets right now, due to the fact that the central banks are so front and center at the moment.