The EUR/USD pair has been choppy during the trading session on Friday, rallying a bit, breaking above the 1.18 level. However, we roll over from there and it looks as if were going to settle on an almost unchanged day. Breaking above the 1.17 level was rather significant, and I think that should be paid attention to. This was the previous neckline from the head and shoulders pattern on the daily chart that had been broken to the downside, and the fact that we turned around and broke above it is a very powerful signal for the strength of the EUR. I believe that one of the biggest drivers of this move has been the lack of a tax bill coming out of the U.S. Congress, and if they keep dragging their feet, it’s likely that we will continue to see buyers jump into this market place. However, keep in mind that the ECB is looking to extend quantitative easing, so therefore although tax bills continue to play the US dollar, there is still a little bit of heaviness to the EUR.
If we break out to the upside, the market should then go looking towards the 1.20 level, and then eventually the 1.21 level after that. Pullbacks to the 1.17 level should find plenty of support, and I believe that if we can stay above that level, the market is very healthy. If we break down below the 1.1650 level, the market should then go to the 1.13 level below, which is the 50% Fibonacci retracement level from the larger move. I believe that paying attention to these couple of levels is crucial to what we do with this market. One thing I think you can count on is volatility.
Written by FX Empire