EUR/USD Forecast – Euro Continues to Consolidate at High Levels

NEW YORK (Jan 17) The Euro has rallied a bit during the trading session on Tuesday, as it looks like we are trying to consolidate at relatively high levels. We had recently broken above the 1.08 level, which of course was an area that we had seen a lot of action at previously, so I do think it is probably only a matter of time before we have to pull back and retest that area. In fact, I would fully expect it, but the way the Euro has taken off recently, it’s difficult to imagine that it’s going to be easy to make a deep contraction.

On the other hand, if we take off to the upside, then the market could go looking to the 1.10 level. The 1.10 level is obviously a large, round, psychologically significant figure that a lot of people should be paying attention to. If that’s going to be the case, I think you’ve got a scenario where the market will really start to take off and it will be a longer-term change. There is a lot of talk that the European Central Bank is going to remain very hawkish, but whether or not they can do so remains to be seen as Europe as probably going to deal with stagflation before it’s all said and done.

The short end of the yield curve suggests that the Federal Reserve still has 3 more interest rate hikes ahead, so that’s something that needs to be kept in the back of your mind. In other words, we may be getting a little bit stretched, but I certainly would not be a seller until we clear 1.08 decisively.

FXEmpire