The EUR/USD pair fell significantly during the session on Friday, and even managed to break down below the 1.30 level. However, you can see that a significant amount of the loss was recovered by the end of the session, and as a result we have formed a hammer. This hammer suggests to us that the buyers are not ready to give up quite yet, and as a result we believe that this market is simply going to continue to consolidate.
A move above the top of the hammer candle for the Friday session would of course be bullish, and as a result we would be buying this market as consolidation would be more than likely the direction of the market, having it breaks to the upside and possibly as high as 1.32 before the move is over.
Overall, it wouldn’t surprise us all to see this market go sideways as the markets have been extraordinarily quiet lately. In fact, it wasn’t until the Yen related pairs broke out on Thursday that we saw anything were trading in the Forex markets at all. However, the breakdown that we saw on this market really wasn’t enough to get us to be significantly short, and therefore simply stay out of the market.
A break of the lows from the Friday session of course would be a nice sell signal, sending this market down towards the 1.28 handle in relatively short order. The 1.28 level is significant on the longer-term charts as well, so as a result we don’t see a selloff breaking through unless something catastrophic in the news coming out of European outlets spooks the market yet again. Don’t get us wrong, this is certainly possible, and it has been a few months and we had a nice panic selloff in Europe. After all, that seems to be the running theme: The markets overlook all of the European problems for a certain amount of time, and then more bad news gets released and market selloff drastically. It has been a while, so we certainly have to think that it’s possible that we will see a fairly soon. Until then, we believe that this market will continue to grind and more or less a sideways fashion.
Written by FX Empire