The EUR/USD pair went sideways initially on Friday, and then had a very volatile session as the jobs number in America came out much longer than anticipated. However, towards the end of the session it looks as if the pair is starting to show strength again, and the weekly candle is starting to look more like a hammer than anything else. I believe that the market is going to try to go to the 1.15 level where we have seen significant resistance over the last 3 years. A break above there, and more importantly a daily or even weekly close above there would be a very bullish sign that the market is ready to continue to go to the 1.18 handle. Because of this, I believe that the market is essentially a “buy on the dips” type of situation, least in the short term.
Strong resistance ahead
If we were to break out above the 1.15 handle, that should be a major signal that the downtrend is over, and that the buyers are going to start picking up the EUR over the longer term, and perhaps trying to drive it towards much higher levels. This is a scenario where the Federal Reserve is looking to raise interest rates, but quite frankly the ECB recently has been talking about tightening monetary policy, which is something that is a bit of a surprise. Because of this, a rebalancing of this pair may be needed, and that might be what we are seeing. Alternately, if we were to break down below the 1.1350 level, we should then go testing the 1.13 level, and a breakdown below there since assessing the 1.11 level after that. All things being equal though, it does look like the buyers are in control.
Written by FX Empire