The EUR/USD pair has rallied significantly during the day on Friday, breaking above the 1.1175 handle. In doing so, it looks as if we’re going to go looking for the 1.12 level. That is an area that of course attract a lot of attention due to being a large, round, psychologically significant number. It is also the marketplace that has been consolidating lately, between the 1.11 level on the bottom and the 1.13 level on the top. Because of this, we are approaching “fair value”, which is exactly that the markets tend to do, revert to the mean. If we can break above there, the market will probably continue to go higher, perhaps the 1.13 level after that. I don’t know if we can break above that level, but given enough time, I suspect that we will at least try.
Longer-term consolidation
The longer-term consolidation of course extends all the way to the 1.115 level above, which is my longer-term target. In the meantime, I anticipate the pullbacks will be looked at as value, just as the financial analyst are starting to suggest that perhaps the European Union is growing quicker than once believed. The one thing I think you can count on is quite a bit of volatility, and that of course is nothing new in a market that is so highly saturated with high-frequency trading. Expect noise, but I do think that longer-term there is a significant amount of bullish pressure. That bullish pressure will Wayne from time to time, with the Federal Reserve raising interest rates, but at the end of the day the market already knows that so it will have a limited effect. If we did breakdown below the 1.11 handle, I think the market will probably go looking for the 1.10 level.
Written by FX Empire