The EUR/USD pair initially tried to rally during the session on Tuesday, but struggled at the 1.22 handle. With that being the case, the market looks as if it’s ready to continue to go lower as the Euro continues to be very weak, and distrusted by most Forex traders out there. With that being the case, we ended up forming a shooting star which of course is a very soft sign and suggests that we are going to go lower.
On top of that, the US dollar continues to strengthen to the point where this pair is starting to press significantly lower time and time again. The 1.2050 level is the target that we have for the longer term, and it’s also the massive support level on the monthly charts that has caused this market to turn back around several times over the last five years. We are getting close to that, so we are starting to shorten the length of our trades, although we are still only selling, because there is no reason to fight this trend quite yet. As you can see, we tried to rally on Tuesday but anybody who got cute about trying to “pick the bottom” of this pair, got absolutely smoked.
Ultimately, the Euro is oversold in our opinion. We are quite ready to turn things back around yet obviously, so short-term selling opportunities are probably the best trades that we see coming out of this particular Forex market. With that, the lack of liquidity also adds to the potential erratic behavior of this pair, meaning that we could have a bit of bouncing. Keep that in mind, because it might make for a rough ride if you are trading short-term charts.
That being said, even if we break the top of the shooting star, which of course is a significantly bullish sign most times, we are willing to sit on the sidelines and wait for selling opportunities as we still need to test that massive support level from the longer-term charts down at the 1.2050 handle. Once we get there, we will start to think about buying again.
