The EUR/USD tried to rally during the session on Monday, but as you can see gave up most of the gains as we reach towards the 1.34 level. Because of this, it shows is that this market is still finding a significant amount of support below, but unfortunately it is finding a significant amount of resistance at the 1.34 handle. Because of that, we feel that this market will eventually breakout, but in the meantime isn’t ready to do so.
That being said, we feel that the summer months will provide a lot of choppiness, it is just difficult to try to get some type of trend following trade together. With the Federal Reserve and its tapering in September being a possibility, a lot of people were focusing on the fact that the Americans may not be going through as much quantitative easing which should bring up the value of the Dollar. On the other side of the Atlantic, you have a European continent that has just come out of recession led by both the French and Germans. Because of this, make sense of the Euro would be strong at the same time as well.
We feel that this market is essentially in a “holding pattern” at the moment, simply because there are so many moving parts of the moment that we do not know what’s going to happen. Adding to that confusion is the fact that a lot of the large money traders are still away on holiday, so it makes sense of the market simply aren’t doing anything at the moment. If you are short-term trader, this is a great thing as we have roughly a 200 PIP range, but if you are not a short-term trader, it does present a lot of challenges.
If you do see a daily close above the 1.34 handle, it is a very bullish sign and we would be more than willing to start buying at that point. On the other hand, if we break down below the 1.32 handle, we think this market will fall way back down to 1.28 over the course of the next several weeks. Either way, we get a feeling it’s the Federal Reserve is going to make something happen.
Written by FX Empire