The EUR/USD pair has been very volatile during trading on Monday, initially falling, then bouncing, then falling again as we approached the 1.18 level. A lot of the volatility is due to a failure by German government to form a coalition, which of course has a lot of people concerned that there might be another snap election. This has caused a lot of noise in the market, and that being the case it’s likely that could continue until we get some type of resolution. Germany is such a huge part of the European Union that it’s going to move the currency more than any other country. If there is political uncertainty or instability, that should continue to weigh upon the EUR in general. Beyond that, we have the European Central Bank with its extended quantitative easing Wayne upon the currency as well. We recently formed a massive head and shoulders, with a neckline at the 1.17 level underneath. However, we broke above there, so I think that has been negated, but it does not wipe out the support and resistance, just the pattern.
A breakdown below that level should send this market much lower, especially if we can break down below the 1.1650 level after that. We can find the market drifting down even lower, perhaps to the 1.13 level as suggested previously. I would think that the 1.15 level would also be supportive as well. However, I believe that the 1.17 level underneath should offer support, and therefore I would anticipate we could see a bounce. That bounce should send this market looking towards the 1.27 level above, and then the 1.21 level after that. I think regardless of what happens, were looking at a lot of volatility just waiting to happen in this market, moving with headlines.
Written by FX Empire