Looking ahead, market liquidity is expected to be a potential concern next week, which could lead to more volatility.
- EUR/USD faced a slight pullback during Friday trading, testing the important 1.10 level.
- This level has significance because it previously existed as a round number that acted as a resistance and was psychologically important.
- While the market is showing signs of pulling back, it is important to consider the broader context, despite the fact that it has fallen significantly.
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The euro market has become a bit too wide in recent days, contributing to the observed pullback. The possibility of a deeper retracement to the 1.09 level should not be ignored. However, if the market reverses and breaks above, the 1.10 level is expected to become another resistance level.
A break above the 1.10 level could set the stage for a move towards the 1.1250 area, which has historically been a major resistance level. In the longer term, these developments could signal further strength in the euro. Nevertheless, in the short term, the market is characterized by noisy movements, reflecting significant changes in sentiment.
The Fed’s recent pivot to the possibility of rate cuts next year contrasts with the stance of the European Central Bank, which has not yet considered such a step. This divergence contributes to market uncertainty and volatility.
Amid these changes in the situation and the interest rate differential between the US and the euro area changing, it seems that the mainstream is to buy the euro on the spur of the moment. It remains important for market participants to monitor the 10-year Treasury note, particularly its yield.
Looking ahead, market liquidity is expected to be a potential concern next week, which could lead to more volatility. Nevertheless, the past few days have shown that buyers have the upper hand, suggesting that the “buy the push” strategy remains in favor.
After all, the euro faces challenges and opportunities amid changing sentiments and central banks’ positions. The 1.10 level is currently testing the market, but it is important to note possible support at 1.09. If the pair breaks above 1.10, it may target 1.1250, indicating that the euro will continue to appreciate in the long term. Short-term volatility is expected given recent market changes. While buyers appear to have the upper hand, vigilance and prudent trading strategies are essential, especially with potential liquidity concerns looming.
Potential signals: For the EUR/USD pair, the 1.10 area is attracting attention as a major barrier. If we can get that back, the positivity will be immeasurable. I am a buyer that closes above there every day and my stop loss is 100 pips. However, the market showed a negative attitude on Friday.
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