The European Union and the United States are no longer the two strongest trading partners, but rather they are part of a united economic bloc. Now that the Euro and US Dollar are making almost perfect synchronicity, there is a real possibility of an investment boom.
The European currency and the US Dollar have almost perfect synchronicity. Thus, it is now almost certain that the EUR/USD rate will be in a range bound position before the next European Central Bank meeting. Many traders are wondering how this is possible with the economies of these two countries so closely intertwined.
The EUR/USD rate seems to be under pressure, and could drop below its prior historic high in the very near future. The reason is, the Euro is overvalued. But, as stated earlier, the USD and the Euro are not the two strongest trading partners.
Therefore, there is a real risk that either of these two currencies will depreciate against the other. In fact, the EUR/USD is one of the highest risk currencies when it comes to overvaluation. Therefore, in order to avoid overvaluation, a trader needs to look at both currencies from a range bound position.
As we discussed earlier, the Euro is already overvalued and could rise above its previous historical high. A rising Euro can be expected as it passes the point of only minor resistance levels. If this happens, there will be a big rise in the Euro and a significant rise in the USD as well.
The EUR/USD will likely rise above its historical high as it is being driven higher by huge profits from US Dollar trading. The USD and the Euro have almost perfect synchronicity. So, it is very likely that there will be some strong support and resistance levels along the Euro/USD trade.
One of the political uncertainties is, are the Eurozone economies going to meet at the European Council or the German Parliament? Both issues could be major contributors to overvaluation and volatility in the EUR/USD and the USD. So, if these political issues are not resolved soon, there is a real risk that the USD could rise above the Euro and both currencies may go into ranges bound positions.
There is also the question of a European exchange rate mechanism known as the EESC. It has the ability to control the Euro and the USD. The problem with the EESC is that there is very little visibility into its actual actions.
However, there is a lot of uncertainty about the political problems within the Eurozone and the political uncertainty is playing a large role. As we have noted previously, the EUR/USD can quickly rise if there is a crisis within the Eurozone and the EUR/USD may rise to extreme levels.
Some time ago, there was an important clue as to the precise timing of the break out of the EUR/USD price into a higher range bound position. This was discussed in depth during a recent talk on the HFT system that has dramatically impacted the trading markets.
It was reported that the break out of the EUR/USD could be a few days away if the Eurozone economy meets up with the political problems. If this is correct, it is imperative that we act now to minimize the chances of the EUR/USD breaking above its historical high and possibly heading into a higher range bound position.