- During the trading session on Thursday, we initially some of the EUR/USD pair fell a bit, only to turn around and show signs of life.
- By doing so, the market looks as if it is trying to recover completely, but at that point, I would also point out the 1.08 level, which is a large, round, psychologically significant figure and an area that has been important multiple times.
- If we were to break above there, it would obviously be a very bullish sign, perhaps sending the market much higher, but I also recognize that there has been a lot of noise in that region over the last several days.
Bond Yields
A lot of this story has been the bond yields in Germany exploding to the upside, which of course makes the Bureau quite a bit more attractive. Short-term pullbacks will continue to look attractive as long as yields in Germany continue to rally, but you also have to wonder how long it’ll be before people start to run back to the US dollar if there is some type of major “risk off moment.”
It is worth noting that the market started to sell off after the tariff announcement during the previous session, but now that we are approaching the 1.08 level, I think you will get a little bit more in the way of truth here, a couple of days previously, every time the market tried to rally it gave up the gains and started to fall again. The fact that we have turned around so vehemently suggests to me that there is real strength underlying this market.
That doesn’t mean that the market can’t fall, obviously it can, and if we were to break down below the lows of the Thursday candlestick, that could be fairly catastrophic. At that point, I would anticipate that you would see the US dollar strengthen against almost everything, not just the euro. At the very minimum, I would be looking for a move to the 200 Day EMA, possibly even as low as the 1.06 level.
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