The EUR/USD pair did very little during the day on Wednesday, as we continue to bang around the 1.16 level. I think that the 1.17 level above is essentially the “ceiling” in the market, as more than likely there will be a lot of market memory in that area. Quite frankly, this is an area that was the neckline of the head and shoulders on the daily chart that has broken down, and that is an area that I have a lot of interest in. If we try to rally towards the 1.17 level, I think there will be an extreme amount of bearish pressure. At the same time, we have the US Dollar Index breaking out of an inverse head and shoulders, which is the direct negative correlation to this chart.
The headline number from the head and shoulders breaking down is the 1.13 handle. I suspect that is eventually where we are going to end up, but you will probably have to be patient to see the market reach down to that area. The European Central Bank looks likely to keep its monetary policy very loose for the near future, and I think the market is starting to get its head together on that. On the other side of the Atlantic, we have the Federal Reserve looking likely to raise interest rates several times later this year. There is also the problem with an over exuberant stock market. That generally helps the US dollar when it rolls over, and there is the possibility that we could get that happening relatively soon. Because of these reasons, I think that the EUR/USD pair cannot be bought until we were to close above the 1.17 level on a daily close. In the meantime, I think short-term rallies are selling opportunities on exhaustion.
Written by FX Empire