The EUR/USD pair fell during the session on Monday, as we sliced through the 1.33 handle. However, you can see that there is a significant amount of support below there, so the buyers may step in and support this market. This being said, it’s very likely that we will see a lot of messy action over the next several sessions simply because it is the end of the summer while a lot of money is not in the market.
We believe that this market will eventually find support and bounce from here, but the real stories going to be told at the end of the month, if not during the month of September. The Federal Reserve will determine the exchange rate for this pair, simply by whether or not they choose to taper off of quantitative easing. If they do, it’s very likely that this pair will collapse as the value of the US dollar will skyrocket. If we get that announcement, we are very confident in seeing 1.28 yet again. However, if the Federal Reserve blanks in the face of the markets, and what the market seem to want, this pair will go higher and eventually breakout to the upside. We consider this pair broken out if we can get a daily close above the 1.34 handle.
In the meantime, this is a very difficult market to trade for anything more than a short-term move. Right now, it’s probably easier to buy and sell, but we don’t think that necessarily the market has made up its mind yet. The lack of liquidity and quite frankly lack of clarity, we will keep this market going sideways for the intermediate timeframe. Keep in mind that the Europeans are just now coming out of a recession, and are lagging quite far behind the Americans at the moment. In the end though, it’s going to come down to the Federal Reserve yet again, which isn’t exactly the most decisive body of bureaucrats in the world currently. In the meantime, keep your stop losses short, and try to keep your position sizes relatively small.
Written by FX Empire