The EUR/USD pair gapped higher at the open on Monday, but then pulled back to fill that gap almost immediately. Now that we have fill that gap and continue to go higher, I think that the market is desperately trying to get towards the 1.20 level above. Ultimately, pullbacks continue to be buying opportunities, and I think that eventually we will build up the necessary momentum to clear the 1.20 level. Once we do, the market should become very aggressively looking towards the 1.25 handle above which is my longer-term target. We had recently broke out of a 3-year consolidation area, and measuring that rectangle suggests that 1.25 target.
I continue to buy dips in this market, and have been for a while. I don’t think that it will necessarily be the easiest trade to take at times, but it’s obvious that we have exploded to the upside. When you look at retail positioning, most retail traders are short of this pair, which is almost a guarantee that it’s going higher. If Mario Draghi suggest that the tapering begins soon during the September meeting, this will probably supercharge this move. The Federal Reserve looks a little bit shaky, and I think this is being reflected in this pair more than any other currency pair currently. Gold markets are breaking out, and while the euro itself is a necessarily tied to gold, the inverse correlation to the US dollar and both of those assets tend to drive those markets in the same direction over the longer term. Given enough time, I believe that dips will attract value hunters, and I believe that the downtrend in this pair longer-term is over, and has been for a couple of weeks. I have no interest in selling.
Written by FX Empire