The EUR/USD pair went back and forth during the session on Monday, losing slightly by the end of the day. The resulting candle looks pretty neutral, and as a result we think that this market continues to go sideways for the short term. It’s very likely that the market simply won’t do anything in the short term, simply because we are getting towards the end of the summertime, which of course is the major vacation season for larger traders throughout both North America and Europe. Because of this, we feel that this market will more than likely be one that doesn’t offer much in the way of trading opportunities, as the markets are simply waiting for volume to return.
On top of that, there are concerns about whether or not the Federal Reserve will taper off of quantitative easing in the month of September. If they do, that of course is very strong positively for the US dollar. On the other hand, if they do not taper off of quantitative easing there’s a good chance of the Euro will be the beneficiary as it is considered the “anti-dollar” most of the time.
Within this chart, you can see that there is the downtrend line just above, which of course is the top of the larger descending triangle. This descending triangle suggests that the market is going to go back down to the 1.28 handle sometime in the near future. However, if we do violate that downtrend line, there’s nothing to keep this market from going much higher.
If we manage to get below the 1.28 handle on a move lower that would be a significant break of support, and probably have this market chasing all the way down to the 1.22 handle. At that point time, is very likely that this market would become “broken” and we could go much lower than that as support would be all but lost. As far as the upside on a breakout above the downtrend line, we would suspect that the 1.35 handle would be targeted first, just simply because it is a large round psychologically significant number coming up next.
Written by FX Empire