As the dollar climbs, EUR/USD sparks a recent lower low
As the Fed Funds Futures contract shows that US interest rates are now unlikely to be cut in March, and the US 10 year treasury yield climbs to new highs for the year, the dollar is rising to new recent highs.
IGTV’s Jeremy Naylor looks at the dollar’s performance and what it means for the sterling, the yen and the euro. As the EUR/USD trade pierces the 8 December lows of 107.23, the next potential downside target will be the low point of the hammer candle on 1 November at 105.16.
(AI Video Summary)
US dollar currently very strong
People used to think that the Federal Reserve (which is like the boss of money in the US) would lower interest rates in March, but now it's not very likely. Instead, they might do it in May. Because of this, the US dollar has become even stronger.
Impact on other currencies
Jeremy Naylor then focuses on the EUR/USD trade. Basically, he's looking at how the US dollar compares to the euro (which is the money used in many European countries). He shows some charts that prove how strong the US dollar is right now. It's reached a really high point that hasn't been seen since 14 November. This has affected other currencies too, like the British pound and the Japanese yen, which have become weaker.
Naylor talks specifically about the EUR/USD trade, which has gone back to where it was before and has gone below an important line. This has made people start buying it again, which means the value is going up a bit. But he thinks that the US dollar will stay strong and expects the value to go down again. If this happens, he plans to do something called "shorting" the EUR/USD trade, which means he'll sell it and hope to make money as the value decreases even more.
In the end, Naylor believes that the US dollar being strong is the most important thing in the market right now.
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