The Euro is shot straight up in the air during the course of the week after the CPI numbers came out at 7.7% year-over-year in America.
The Euro has shot straight up in the air during the trading week, breaking above the 1.02 level and even piercing the 1.03 level. That being said, the market has been overdone for quite some time, and it was probably looking for some type of excuse to take profit. The CPI numbers this week in the United States came out at 7.7% year-over-year, which is still extraordinarily high but it was lower than anticipated. Because of this, the “hot money traders” are out there betting on the Federal Reserve loosening things. They are nowhere near doing that, and therefore I think this is probably going to be a short-lived rally.
The size of the candlestick is rather impressive, but you should also keep in mind that almost everybody was leaning in the same direction. This does tend to make for vicious bear market rallies, which is exactly what we have just seen. Keep in mind, bear markets are not healthy markets, so that’s normally when you see these explosive moves.
Furthermore, you need to keep in mind that the Federal Reserve has an inflation target of 2%, so we are miles away from that. In fact, we are triple that, almost quadrupled. In other words, the Federal Reserve is going to remain tight for as long as the eye can see, and therefore the US dollar should continue to be the strongest currency out there. It’s probably going to be a case of “my currency, your problem.” But this being the case, I do think this is going to end up being a nice selling opportunity in the Euro.
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Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.