(MENAFN- Daily Forex) The eur/usd had a choppy session on Tuesday, as we continue to see a lot of nonsensical trading. It's essentially Brownian motion, meaning that we are just going back and forth without picking up any type of traction.
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I think at this point the 1.09 level is worth paying close attention to because we can break above there, then it's likely that we go looking to the 1.10 level. The 1.10 level is an area that more likely than not would attract a lot of attention, and a lot of people out there would pay close attention to it. Breaking above that would keep the Euro very bullish , which makes a certain amount of sense considering that traders currently price and 350 basis point rate hikes coming out of the ECB, with the Federal Reserve only raising interest rates by 25 basis points at the next meeting. Whether or not that into being the case is completely different, but that's what the expectations are and therefore you are seeing it in the currency markets.We Could Break Down
That being said, if we get a sudden flood of fear into the marketplace, then it would make a certain amount of sense that the US dollar becomes very attractive to most people. I think at this point we've got a scenario where we could break down, but right now it looks like we are just simply trying to squeeze higher. The 1.09 level in the 1.07 level defines a short-term consolidation zone, and I think a lot of short-term traders are going to take advantage of it.
With the February 1 announcement coming out of the Fed next week, then it's likely that the market will continue to look at the currency markets with a bit of hesitation because if the Federal Reserve shocks the market in any sense whatsoever, we will more likely than not see a huge move in one direction or the other. I do believe that the Federal Reserve is going to say type much longer than traders are giving them credit for, as some are even suggesting that there will be rate cuts later this year. The federal reserve has clearly stated that inflation is our biggest concern right now, despite the fact that Wall Street is screaming for cheap money.
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