The EUR/USD pair initially fell during the session on Wednesday, but as you can see by the charts we managed to bounce enough to form a hammer. This looks like a market that’s trying to form a little bit of a base in this general vicinity, and we now see the 1.2850 level is gaining little bit of an ordinance. After all, this is the area that the market has been attracted to recently, and as a result it does look like we could see a little bit of a bounce from here.
Looking at the overall situation however, we do recognize that the European Union still is an area that has plenty of problems. The confidence in the banking system certainly has been wracked quite a bit by the situation that we saw play out in Cyprus, and we should see continued poor economic numbers out of the EU going forward. With that being the case, it’s very likely that this market will continue to weaken over time, but it does not appear that we are going to see it right away.
The European Central Bank has a monetary policy meeting today, and that market is essentially expecting nothing out of it. The Europeans have been very stubborn about cutting rates, and quite frankly if it happened – it would catch almost everybody off guard. That being said, it’s likely that we could see a little bit of a rally in the short term.
We do however see the 1.30 level as being very resistive at this point, and do not expect to see the market cross that level without a serious fight. Because of this, we are actually waiting to see some type of bounce from this area in order to start selling. We also have the nonfarm payroll numbers on Friday, and that almost always pushes this pair around quite drastically as well. With these factors, we are being very patient, but certainly will be buying the Euro anytime soon. We will more than likely have a bit of a fight above, and at this point time we have to agree with the sellers.
Written by FX Empire