The EUR/USD pair fell during the session on Thursday, but found enough support in order to bounce and form a hammer. This hammer looks like it’s a market try to breakout above the 1.35 handle, but we find it very difficult to imagine that this market will be able to do so easily. With that in mind, we are more than willing to sell a break of the bottom of the hammer, but do recognize that the area below will have quite a bit of supportive action, simply because we have seen so much pressure to the upside. However, we do not like the Euro longer-term, simply because the market is still in reaction to the European Central Bank and its surprise cut last week.
That surprise rate cut of course send the markets much lower in this pair, but as you can see this market has been somewhat resilient, and as a result we think that this market is probably going to try to form some type of consolidation area between the 1.33 level on the bottom, and perhaps as high as the 1.36 level on the top. With that being the case, it does form a little bit of an “epicenter” around the 1.35 handle, because of that we feel the market may simply be attracted to that level, but do recognize that the fact that the 1.35 level gave way last week does suggest that significant amount of selling pressure.
Keep in mind that the Federal Reserve is still being watched as the employment situation in the United States will dictate whether or not they can taper off of quantitative easing. If jobs numbers continue to improve in America, you can expect this pair to go much lower. This is because the Federal Reserve will be getting that much closer to cutting back on quantitative easing while the Europeans saw something in their economic numbers that concern them enough to cut rates. With that being the case, we think that the upside in this pair is somewhat limited as the Europeans have certainly shocked the market.
Written by FX Empire