Euro Price Action Analysis: EUR/USD Breaks Out – More Room to Run? This may seem odd, but the simple explanation is that this is an indication of how fragile the market has become. One that needs to be carefully managed and supported by a strong long term policy.
For those who are not aware, the ECB has announced a rate rise, even if it is not yet in effect, the short-term financial market structure is what is causing this, as well as the behavior of central banks all over the world. We all know where we are headed and I am pleased to be in the right place at the right time.
People are in a panic mode and I am worried. The Euro and American Dollar is being positioned to break out of the range. I want to do something to protect this market.
Since the first signs of concern came out, the European exchange rates have been doing rather well, even considering the troubles in the world economy, they have still maintained their own level despite the inflationary pressures. The problem is the Fed wants to bring back rates, but there is no way they can continue to do that without some damage to the economy.
When the security prices rise and the exchange rates rise, then they do indeed shift, this normally happens when the Fed raises rates, and it is often seen as a major reversal. It is also seen as the Federal Reserve is tightening the purse strings, and this again causes a rapid change in markets.
The biggest fear for the Fed is that the Euro Price Action Analysis: EUR/USD Breaks Out – More Room to Run? is a preview of what is to come.
To get out of this situation, they are likely to need to adjust their true price level, and the only way they can do that is if they raise interest rates dramatically. And there will be quite a reaction to that. The markets will turn on them, and it will take them all the way up.
If they do lower the rate, it will cause a full reversal of the trends that have formed since they began to tighten the purse strings. The Fed is getting nervous, because the last thing they want to see is a weak Euro, and a strong dollar.
What the Fed fears is that the American people begin to realize that it was the Fed that caused all the problems, not the Fed. If we are going to get out of this situation, we need a stronger policy, so if they lower their policy, they will cause more of a reaction, and then the Fed’s credibility is going to be very questionable.
In addition, the price action analysis: EUR/USD Breaks Out – More Room to Run? would imply that the Fed has some other things in mind that will give them another reason to hike interest rates higher, but one thing is certain, and that is the currency markets.
If the USD falls below the EUR, then the entire peg will collapse, and this is a huge change in direction, and one that the Fed does not want to go down. Of course, they will not want to risk a big loss here, because they are probably in the process of figuring out just what the right policy would be.
Right now, we are seeing the Dollar increase, as a result of the increased demand in the world, and to some extent, a strength of will. If the price action in the market continues to swing against them, then we could see the dollar get down below the EUR, and that will be an indicator of the beginning of the end for the US Dollar.