The EUR/USD pair fell during the session on Wednesday, as the US dollar gained a little bit of a boost from the minutes that were released out of the Federal Reserve from the last meeting. In these minutes, it shows that there was a broader consensus and amount of support for the tapering timeline that Ben Bernanke had outlined. If that’s the case, this could be very dollar positive going forward, and as a result it makes complete sense of this pair did fall.
However, what we found interesting is that as soon as we headed lower, we bounced right from the first signs of support, which shows us that perhaps the market isn’t quite sold on tapering yet. If that’s the attitude of the markets, the Euro may continue to go higher regardless of what happens. We don’t necessarily think that, and we still believe that in September if the Federal Reserve tapers off of quantitative easing it will be dollar positive. However, we cannot deny the fact that the candle for the Wednesday session does look a little bit like a hammer, and of course could say the same thing considering that we bounced as hard as we did.
Adding to the impressiveness of the bounce is the fact that it occurred after the announcement, something that defies logic. If that’s the case, this may simply be a matter of the market wanting to go in a particular direction, regardless of what the news is. If we see this from time to time, and quite frankly it is dangerous argue with a market that has made up its mind already.
The Europeans have recently exited a recession, so this of course means that the Euro should continue higher in general. Really at this point in time it comes down to what the market’s reaction is going to be to the Federal Reserve, which will be difficult to ascertain quite yet, simply because the liquidity is not in the marketplace at the moment as we are at the end of summer. However, a break of the highs from the session on Wednesday should see this pair go higher.
Written by FX Empire