The EUR/USD pair fell initially during the day on Friday, but then bounced above the 1.12 level only to find a significant amount of selling pressure. That being the case, we dropped again and made a fresh new low and it now looks as if the EUR/USD pair is going to slowly grind the lower. If we can break above the 1.12 level in close above there on a daily chart, I think at that point it’s probably a nice buying opportunity. However, looks as if the short-term traders are looking to drive this pair lower and the volatility will continue. This is only been exacerbated by the surprise election’s out of the United Kingdom, as it throws in the whole divorce proceedings from the European Union into question. It’s not that I don’t think that the European Union is going to suddenly keep the United Kingdom, just that we don’t know what the type of negotiating positions we will see. In other words, there is uncertainty and of course markets don’t like uncertainty.
Federal Reserve interest rate hikes
We do know that the Federal Reserve is going to raise interest rates at least once this year, and that helps the US dollar. The European Center Bank has not suggested in a massive amount of tapering when it comes to quantitative easing, so I think we will continue to see a little bit of bearish yet squishy pressure. In other words, this market will be dominated by back and forth fighting over scraps. This is what happens when you get a high-frequency trading environment, as larger firms are looking to only pick up a couple of points and get out. That makes longer-term moves much more difficult, but currently I think the key is going to be the 1.12 handle. Because above there, it’s time to start buying but while we see resistance below, it’s time to start selling.
Written by FX Empire