EUR/USD rose a bit on Tuesday as the best levels came off. The pair has been choppy lately to say the least, and the action continues to remain so. The trend lately has been for the Europeans and Asians to sell this pair off, and the Americans to come in and pick it back up. However, something will have to give way sooner or later, and the time for a move could even be today.
With the Federal Reserve having its announcement in the afternoon part of the US session, there are a few different possibilities going forward. The Fed could announce some kind of quantitative easing measures, and this would certainly push this pair higher as the Dollar losses some strength. However, this is very unlikely as the data in the US has been getting better as a general rule lately.
The Fed could also hint that the whole idea of quantitative easing is still a thought, and as a result the markets would probably move a bit higher, but not overly so we don’t think. After all, a “maybe” isn’t the same as a firm commitment. This is a reasonable outcome from what we have studied.
However, there is the third possibility as well, and this one could be interesting. If there is absolutely no mention of easing going forward, or even mention about fears of inflation, this pair will fall off of a cliff. Needless to say, the 1.30 level will be massive support, but the fact is that the overall bias remains to the downside, and the pair will more than likely be lower next year than it is at the moment.
Overall, we don’t like buying Euros as there are far too many problems in that region. Because of this, it simply doesn’t make sense to own an asset that is mired in the financial woes that Europe is, and the bond yields are warning us that the European Union is going to hit a rough patch soon. Because of this – we sell rallies, and definitely if they include weakness at the top of the triangle that we see forming.
Written by FX Empire