The EUR/USD pair fell most of the session on Monday, but the Americans came in and gave it a lift yet again. The resulting candle looks somewhat like a hammer, but it far too long in the body to be considered as one. None the less, the underlying psychology is the same as the buyers were willing to come back and buy this pair up later in the session.
The European Union has plenty of concerns, and the resilience of this pair is truly remarkable truth be known. The area has several countries that are now paying very high interest rates to bond holders and social unrest aren’t exactly an uncommon thing these days. There are a lot of political headwinds as well, and this has all spread to the core countries now – an ominous sign indeed.
With this being said, it seems that the pair just won’t fall for any real length of time. This suggests to us that once the now well-known and obvious support level at 1.30 gives way, this pair will absolutely crumble. The buyers aren’t exactly known, but there are reports of Asian central banks as well as the Brazilian central bank getting involved in this pair as they diversify away from the US dollar. As the Euro falls – so does their massive bank reserves.
The downtrend line that has formed signals what could be a descending triangle. If this level gives way to the upside, this pair will climb higher. However, we think that the downtrend line will continue to hold prices lower, and we think that the descending triangle should continue and signal that the sellers are finally starting to take a bit better control of the situation. With this in mind, we are only selling this pair until the daily close above the downtrend line.
With the 200 day EMA just above the top of the potential triangle, this looks as if the market will continue to struggle higher, but the longer-term should see lower prices. We are selling rallies on signs of weakness, especially is we see the top of the triangle hold as resistance.
Written by FX Empire