- The euro has fallen rather significantly during the trading session on Friday to plunge towards the 1.82 New Zealand dollar level.
- At this point it’s obvious that the market is likely to continue to go back and forth with a range that is defined by the 1.81 level underneath and the 1.84 level above.
- In general, this is a market that is trying to work off some of the excess froth that we had seen previously.
With that being said, I think this is a market that probably is trying to determine whether or not it can continue to show this type of strength. After all, when markets do move as sharply to the upside as we have just seen, it does make quite a bit of sense that they have to digest some of the gains.
As Long as We Can Stay Afloat
Ultimately, as long as we can stay above the 1.80 level, then I think you have a real shot at this market going higher over the longer term. That being said, central banks around the world, including in the European Union and New Zealand, are in the midst of cutting rates and therefore it’s all a race to the bottom. Remember, you are trading relative strength against each other, not necessarily that you believe in one economy over the other. Both of these economies are probably heading for some problems, but really at this point, when you start to worry about risk, Europe is considered to be a much safer place than New Zealand, although New Zealand isn’t exactly the wasteland either.
That being said, I think we will continue to range-bound trade until we finally get some type of fundamental reason to break out. Right now, it does not appear we have it in an obvious form, so therefore I think the market is more likely than not to continue to hang around in the same region, giving you an opportunity to be a bit of a sideways and range bound type of consolidation trader.
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