The EUR/USD pair went back and forth during the course of the day on Monday, showing quite a bit of confusion at the 1.14 handle which of course is the beginning of massive resistance. It extends all the way to the 1.15 handle, so this point in time we believe that the pair sitting in this general vicinity is simply a sign of it trying to build up enough momentum to finally break out to the upside. Pullbacks continue to be bought, and of course we have the Federal Reserve starting to look a bit more domination at this point in time as well. That of course works against the value the US dollar, and that almost always will send money into the Euro.
If we can break above the 1.15 handle, the market will be a longer-term “buy-and-hold” type of situation, but it is not until we get above there that things are easier to deal with. Between now and then, expect a lot of volatility but we believe that pullbacks offer value that people will take advantage of again and again. There is a massive amount of support at various levels, most specifically the 1.1350 level just below, and of course the 1.12 handle below there. This is a market that will eventually break out to the upside in our opinion, but we recognize it may take quite a bit of time to actually do so. In the meantime, this is a market that you almost have to trade from a short-term perspective only.
Because of this, it’s very likely that most traders will only last a couple of hours at best, and because of that you should keep your expectations low at this point. We don’t really have a scenario where we start selling quite yet, but we are open to the idea if we get enough negativity on the chart or of course a change of attitude by the Federal Reserve. Until then, we have to keep in mind that this market is bullish overall, even though it appears we are taking a bit of a rest after the impulsive move.