Euro Gives Up Early Gains

The Euro has been all over the place during the course of the trading session on Friday, initially spiking during the day, only to turn around after the jobs number came out much stronger than anticipated. Perhaps it was not so much the jobs number in America, but it had more to do with the fact that interest rates in America spiked as the Federal Reserve has almost no excuse not to become a very tight central bank. This puts more upward pressure on the greenback going forward, but at this point in time it somewhat of a relative game as the ECB has finally acknowledged inflation.

EUR/USD Video 07.02.22

With the bond market behaving the way it is and the central banks out there all tightening at the same time, this is only going to make volatility worse, not better. Because of this, I believe that it is probably only a matter of time before something breaks, as the central banks all suddenly worry about inflation. We went from a “race to the bottom” to everybody is doing the same thing in the opposite direction.

This is going to cause headaches, so be aware the fact that we will be choppy. If we can break above the 1.15 handle that could continue the overall uptrend in the Euro, but at this point in time a short-term pullback looks more likely than not. The 50 day EMA underneath could offer support, but I would not count on it if we suddenly saw interest rates spike even further in America. There was a massive move after the jobs report so it will be interesting to see how this plays out.

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