The EUR/USD pair had a back and forth session on Wednesday as the Federal Reserve has essentially taken the easy way out for the meeting. In other words, the statement said little about the possibility of quantitative easing , and then Dr. Bernanke mentioned the possibility of easing if needed a couple of times during the news conference afterwards. In other words, the markets are more than likely confused.
With this in mind, the meeting has come and gone, and the reaction hasn’t been all that telling. Because of this, we can only put any thoughts of the meeting behind us and look at the charts. As you undoubtedly know by now, our overall feeling is that the Euro will be lower over time. However, with the recent action it is obvious that the move won’t be easy for the sellers.
The 1.30 level is still the most important one, and a break down below that level sends this market much lower. Of course, there will need to be a daily close below it to confirm the move, but in the long run it will be seen as a significant breakdown. On the upside, there is a downtrend line that has formed lately, and if it holds it could be the top of a descending triangle, with a bottom at the aforementioned 1.30 level. Because of this, we are willing to sell any weakness at the line as well which is currently at about the 1.3250 area – an area that has caused reactions more than once lately.
The 200 day EMA is still sloping down, and this will certainly have the longer term trend traders looking for shorts as well. The buying of this pair isn’t a comfortable position until we close well above the 1.35 level, as it shows that the momentum has picked up to the buy side. In the meantime, we are more interested in fading rallies – especially at the downtrend line of the potential triangle. Of course, any daily close below the 1.30 mark will have us selling as well, and more than likely adding along the way as we run towards the 1.26 level.
Written by FX Empire