Looking to Rally from Here

Volatility and choppiness are likely to persist, but the ongoing consolidation, which has been observed for some time, seems logical. 

• The EUR/USD exhibited a modest rally during Monday’s trading session, signaling a resurgence as it surged above the 1.09 level.
• With this breakthrough, the possibility of a move toward the 50-Day EMA, positioned just below the 1.10 level, comes into focus.
• While I don’t necessarily foresee the US dollar being drastically weakened, the probability of a slight softening against the Euro remains.

The support of the 200-Day EMA underneath remains steadfast, aligning closely with the crucial uptrend line that has held significance for an extended period. Volatility and choppiness are likely to persist, but the ongoing consolidation, which has been observed for some time, seems logical. This market is inclined to continue adhering to the established channel. In this scenario, the market could aim for the 1.1250 level.

A reversal and a break below the 200-Day EMA and the uptrend line could prompt a decline towards the 1.0650 level, a zone that has previously triggered a bounce. A dip below this could lead to more substantial declines. On balance, I anticipate the market will continue a gradual upward grind. Much of this sentiment is rooted in traders’ anticipation that the Federal Reserve might gradually ease its tightening policy. The spotlight then shifts to the European Central Bank (ECB) and its potential actions.

Notably, both Jerome Powell and Christine Lagarde are scheduled to speak in Jackson Hole, Wyoming, at the end of the week. This event holds the potential to introduce more clarity to the market’s direction. Until then, it’s plausible that the market will exhibit a slight upward drift. As Friday’s session concludes, a clearer picture might emerge. At present, the trajectory appears to favor a gradual ascent.

In summary, the Euro’s recent movements indicate a mild rebound observed in Monday’s trading. The push above the 1.09 level signals a resurgence. The potential trajectory includes a move toward the 50-Day EMA, near the 1.10 level. Despite ongoing volatility, the market’s consolidation trend aligns logically with the channel established. Sustained support from the 200-Day EMA and the uptrend line enhances confidence. While uncertainties linger, the upcoming speeches by Powell and Lagarde could steer the market’s course. Until then, gradual upward movement is plausible, driven by the anticipation of shifts in central bank policies. However, Friday could be a big surprise to some, only time will tell.

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