The euro continues to look a touch weak at the moment, as we are drifting lower on Friday, albeit slowly.
EUR/USD
The euro has fallen a bit against the U.S. dollar during the early part of the Friday trading session, but quite frankly, we find ourselves more or less hanging around in the same consolidation area that we have been in for some time. With that being the case, I think you have to look at this as a somewhat sideways market with more of a downward twist on it, as interest rates in America are higher than they are in the European Union.
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The European Union is also going to have to worry about energy, possibly, as the United States pulling diplomats out of Saudi Arabia does suggest that the conflict between the U.S. and the Iranians will continue.
The market is likely to continue to see a lot of sideways noise
Short-term rallies, I think, continue to offer resistance at the 1.13 level and the 1.1350 level. Both are areas that I will be looking for signs of exhaustion, and I will be watching for an opportunity to buy cheap U.S. dollars.
The 1.10 level underneath, I think, is the longer-term target. However, if we do get a daily close above the 1.1350 level, then the thesis goes out the window, especially if we are trying to see whether or not the market is likely to continue to see further meltdown or if we do turn things around.
All things being equal, though, I am bearish on the euro. I think the European Union is about to have a very bad winter, while the United States is expected to raise its rates here over the next couple of meetings at least once, possibly a couple of times next year.
Of course, we have to worry about liquidity issues. If there is a need for liquidity, that means there is a need for dollars. I remain bearish.
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