Ultimately, a lot of this will come down to interest-rate differential and of course what’s going on in the bond markets. At this point, it looks like the US is starting to see interest-rate spike again, which of course helps the US dollar. At the same time, we have the European Union heading into a recession, and a lot of the upward pressure that we have seen over the last couple of trading sessions in the euro had more to do with the idea that perhaps the Federal Reserve would slow down its monetary policy. It’s very unlikely that’s going to happen in the short term, and I believe at this point the market may be finally getting the message again. We have seen this pattern more than once, where the market gets way ahead of itself, looking for more financial help coming out of the Federal Reserve than the Federal Reserve is willing to give.
All that being said, it is more likely than not going to be a situation where we will eventually have to sort things out, but as things stand right now, we are still in a somewhat bearish look. If we were to break above the top of the shooting star from the Monday session, that could be a very bullish sign, opening up a move to the 1.09 level. That would of course be a complete turnaround, but if we break down below the bottom of the 50-Day EMA indicator, I suspect that the momentum to the downside will pick up quite drastically.
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