The EUR/USD pair went back and forth during the session on Tuesday, but formed what essentially looks like a hammer at the 1.32 handle. Because of this, we feel that this market is going to continue going higher, something that we had anticipated to begin with. The 1.33 level looks to be where the downtrend line from the weekly chart should intersect, and as a result we feel there will be significant resistance near that handle.
Because of that, we feel that this is a short-term trade, and then the sellers could come into the marketplace and take over somewhere near the 1.33 handle. If that’s the case, we think this is a “two speed” market, and as a result it really comes down to what time frame you plan on working with. For the shorter-term trader, this market does offer a nice buying opportunity for something along the lines of 80 pips. The longer-term trader, they could be selling of near the 1.33 handle in order to aim for the 1.28 handle.
On the longer-term charts, there is a descending triangle that has formed, and as long as we can stay underneath this weekly downtrend line, that shape is still valid. If that does get fired off, on a break below the 1.28 handle, this market really could tear down at that point time and perhaps a visit low as the 1.22 level in relatively short order. Obviously, the 1.25 handle is a large round number, so one would think that there would be a little bit of support there. Nonetheless, we are bearish on the longer-term in this pair unless of course that downtrend line gets broken and closed above on at least the daily candle. If that happens, we feel the Euro will have been “released” and could continue much higher. Nonetheless, we feel that is probably the least likely scenarios right now, but we do recognize that the Federal Reserve and its decision on tapering off of quantitative easing in September is going to be monumental for the future direction of this pair.
Written by FX Empire