The EUR/USD pair fell hard during the session on Tuesday, as we had anticipated. We managed to break the bottom of the shooting star from the Friday session, which of course found 20 resistance of the 1.30 handle. Because of the shooting star, we feel that this market should continue to grind away in a sideways manner overall, but with a bit of a downward bias.
The 1.28 level should be fairly supportive, and we do recognize that on the longer-term charts, this area is extraordinarily supportive. There is quite a bit of support for the market to chew through below the 1.28 handle, so quite frankly it’s difficult to be short of this market for anything longer than a short-term sell this point.
On the other hand, we are more than willing to start buying towards the 1.28 handle on a supportive candle. A hammer down in the general vicinity would be perfect, and we would absolutely jump all over it. Nothing on this chart screams long-term trade to us in either direction, so we will be using shorter-term charts to base decisions on.
On the one hour chart, we will start to look and try to base most of our trading off of those candles. We firmly believe that the 1.28 level will hold for the meantime, and even if it doesn’t there is plenty of support all the way down to the 1.27 handle. However, you have to keep in mind that this candle does look extraordinarily bearish. But in the end, this pair has a long history of slamming in one direction or the other. We have to begin to wonder whether or not this pair isn’t being manipulated by algorithms and flash trading.
We’ve read recently that the high-frequency traders that have made Wall Street such a mess have started to move into the Forex markets. Without a doubt, this would be the first market that they would look to enter as it is the most liquid trading instruments on the planet. Because of this, we have to wonder whether or not that new type of trader isn’t influencing this market to be so back and forth.