Euro Plunges

The Euro has shown itself to be weak during the early hours on Tuesday, as the US dollar strength continues. At this point in time, the market is essentially waiting to see what the Federal Reserve has to say, which of course will be known Wednesday afternoon in America. Because of this, a lot of people are running for safety in the short term, as the hawkish stance of the US central bank has thrown things into disarray. This has strengthened the greenback, and of course had people running away from risk immediately.

EUR/USD Video 26.01.22

If we were to break down below the 1.1225 level, it is very likely that we will see more downward pressure, perhaps sending this market all the way down towards the 1.10 level over the longer term. Obviously, that is more of a longer-term call, and we need to see what Jerome Powell says but it certainly looks as if the market is starting to think about that. If that is going to be the case, then I will start selling Wednesday afternoon. On the other hand, if the Federal Reserve sounds a little bit more dovish or perhaps “less hawkish” than previously, it could send the euro higher, testing the 50 day EMA at the 1.1375 region. Breaking above the 1.14 level would be a signal for me to start buying again.

Regardless, with the amount of volatility that we see at the moment, the most important thing you can do is keep your position size reasonable. Keep in mind that volatility normally begets more volatility, and the last thing you need to do is blow up your account based on a few errant words from a central banker.

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