Euro Continues to Grind Lower

The Euro has initially gapped lower during the trading session on Monday, but then turned around to fill that gap and break above the 50 day EMA. At that point, we started to see more selling as the US dollar continues to flex its muscles. When you look at this chart, it is very easy to see that there was a bit of a “double top” formed a couple of days ago, so it very much looks like a situation where we could be looking to sell on short-term rallies.

EUR/USD Video 15.02.22

Keep in mind that this pair is moving on higher interest rates in America, but in the short term probably has more to do with how the market reacts to any news coming out of the Ukraine situation between Vladimir Putin and the West. As long as there is tension, it does make quite a bit of sense that the US dollar would continue to strengthen.

Furthermore, the European Central Bank is nowhere near tightening, so it does make a certain amount of sense that the US dollar should continue to strengthen as the Federal Reserve is looking to raise interest rates, and perhaps more importantly, shrink the balance sheet. If the Federal Reserve is not going to step into the markets and continue to buy bonds, that will naturally make interest rates rise.

If we do break down below the 1.13 level, then it is likely that we go looking towards the 1.12 level below. That was near the most recent low, so that of course is something worth paying close attention to as well. All things being equal, I think we continue to fade rallies.

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