The EUR/USD pair broke higher during the course of the session on Thursday, and now looks set to test the 1.10 level yet again. This is an area that should cause quite a bit of resistance anyway, based upon the large, round, psychological significance of the 1.10 level, and of course several other factors that are lining up somewhat simultaneously.
You can see on the chart we have a yellow area, which we think will determine the longer-term move in this pair going forward. This is because there is the 50% Fibonacci retracement level just above the 1.10 level, and the 100 day exponential moving average in this general vicinity as well. Because of this, we feel that it is very likely that resistance will be difficult, and as a result we would not be surprise at all to see this market pulled back down. Currently, we see this market as simply consolidating between the 1.08 level on the bottom, and the 1.10 level on the top.
Because of this, the matter what happens next it will be choppy to say the least. After all, this consolidation area has been very difficult for the last couple of weeks, so with this is very likely that we will get quite a bit of back and forth trading. In the meantime, we are simply willing to follow this, as it makes for easy trading. On top of that, it’s the holiday season so it’s very likely that the markets won’t have quite enough power to break out or break down anytime soon. Because of this, we are sticking to short-term charts but do recognize the 2 previously mentioned areas as potential take off points for longer-term moves. We believe that we will bounce around between now and the breakout and as a result quite a bit of short-term traders will probably be attracted to this marketplace. That has been the theme for some time anyway, and even though we’ve seen a massive move higher recently, the reality is that we are still very much in a downtrend overall.
