The EUR/USD pair gapped higher at the open on Monday, ever so slightly. However, we ran into a bit of trouble at the 1.1920 level, and pulled back. As I write this, the market is trying to recapture the gains, and it’s likely that we will given enough time. The 1.20 level above continues to be a massive resistance barrier though, so I do not anticipate a breakout in the short term. I believe that short-term dips offer buying opportunities, but only for short-term trades. I also believe that the 1.18 level underneath should offer pretty significant support in a bit of a “floor” in the market. If we were to break down below that level, it would be very negative indeed.
Mario Draghi may try to talk down the value of the currency this week, and that could cause a bit of trouble, but given enough time I think that the buyers will return because quite frankly the US dollar is very negative overall, and any hint of tapering out to the European Union is enough to push this market even higher. I think that breaking above the 1.20 level should send this market looking for the 1.25 level, which based upon the previous consolidation area that we have broken out of, would be a viable target as the three-year consolidation being broken out measured from a 1.05 on the bottom to the 1.15 level on the top. By extending that break out, 1.25 becomes the target. Also, when you look at longer-term charts it makes sense as it is a major resistance barrier based upon previous support at that level. We have recently been a bit overextended in this pair, but I do think that it’s only a matter of time before the uptrend continues.
Written by FX Empire