I think the Euro is over inflated and has nothing to do from a fundamental point of view, but I also understand that a level above 1.08 is the door to a massive trend reversal. EUR/USD rose for much of the day on Thursday after the ECB raised interest rates by 50 basis points. In addition, Christine Lagarde reiterated the idea that the ECB intends to remain very fragmented, so naturally people will start buying the euro based on possible interest rate changes. Advertisement Trade EUR/USD now at favorable terms START However, the ECB is pushing into recession, so growth is a big problem. Also, the Euro may be a bit overstretched, so you wouldn’t be surprised to see a small pullback. Combine that with the fact that Jerome Powell has remained on tight monetary policy, and we may start to see a market turn. I believe that the Euro is overvalued and has nothing to do with it from a fundamental perspective, but I also understand that a level above 1.08 is the door to a massive trend reversal. In the short term, I would not be at all surprised to see the Euro try to fall back to the 1.05 level and then maybe even the 200 day EMA. Entering the Holiday Session Remember that we are getting close to the holiday season, so we will likely have very little liquidity. A lack of liquidity can suddenly make big moves in the market based on the headlines or simply make the market very quiet. Friday is the option expiration date on Wall Street, so there will be a lot of money moving at the end of the week. It is worth noting that the euro not only could not hold the gains, but gave them up. I have noticed this at several recent ECB meetings as monetary policy is being tightened and the Euro is losing ground by the end of the day. It’s still up for debate whether or not this will continue, but we definitely feel that cancellation makes the most sense in the short term. I expect a lot of noisy and erratic business behavior, but that’s nothing new given how many different views we have now on global growth, especially in the European Union, which has big energy problems.

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