The EUR/USD pair has been explosive as the Americans got back to work on Thursday, showing signs of trying to break out above the 1.23 handle, which would be a major victory for the bullish traders. We are seeing a bit of a fight there as I record this, so this point I believe that if we can get above the 1.23 level, it should send the bears running. This should leave to a move towards the 1.24 handle, and then eventually the 1.25 level. That’s not to say that this will be an easy move, just that we will probably end up doing that.
Alternately, if we do roll over from here I suspect that we are going to see a bit more consolidation between the 1.22 level on the bottom, and the 1.23 level on the top. That would not necessarily be overtly negative, because markets tend to churn in what is known as an “accumulation phase” when trying to build up momentum. In other words, I don’t have much interest in shorting this market, mainly because I see that there are longer-term supportive levels underneath as well. In fact, I think it’s not until we break down below the 1.20 level that this pair can be shorted with any type of comfort.
Pay attention to the US Dollar Index, because this pair has an extreme negative correlation to what happens there. If it rises, this pair falls. Of course, the exact opposite is true as well. Longer-term, I believe that the weekly charts are telling us that we should eventually go looking towards the 1.32 handle.
Written by FX Empire