Euro Continues to Grind Lower

The Euro has fallen again during the trading session on Thursday to test the lows of the Wednesday candlestick. If we break down below that Wednesday candlestick, it makes a lot of sense that we will see the market fall apart, perhaps reaching down towards the 1.10 level after that. Breaking down below that level could kick off a massive selloff in the Euro overall, which makes quite a bit of sense considering that the Euro has a whole plethora of issues working against it right now.

EUR/USD Video 04.03.22

The European Central Bank is nowhere near tightening monetary policy, while at the same time the Federal Reserve is all but assured to start selling off the balance sheet. Furthermore, interest rate differentials continue to favor the greenback and therefore work against the Euro. Beyond that, we also have to worry about the shooting war in Ukraine, and therefore a lot of people will be concerned about any type of knock-on effect in the European Union.

Further working against the growth in Europe is the possibility of the Russians cutting off energy production, or for that matter sanctions against Russian energy. If that happens, it will certainly be detrimental to the European economy. In general, the market looks very noisy and therefore I think that rallies will continue to be sold into, as the US dollar is not only favored against the Euro but most currencies around the world. With that being the backdrop, I have no interest in trying to buy this market and I look at rallies as an opportunity to start shorting again.

For a look at all of today’s economic events, check out our economic calendar.