The EUR/USD pair rose again during the session on Tuesday, as we start to approach the 1.3150 resistance level. We think this area will indeed be very resistive, and it will only take some type of negative headline coming out of the DC fiscal talks to push his pair back down. However, we are cognizant of the fact that if we rise above this level it would be a very bullish sign.
It’s hard to tell which direction the market will choose to run, because we have so many headline risks. This normally favors a move to the downside, but we do not live in normal times and we are approaching the holiday season which will produce less and less liquidity.
It is possible that we will have a quiet Wednesday session as there are several announcements that, long this week, but the most important for this particular pair will more than likely be the Minimum Bit Rate coming out of the ECB. Even more important will be the press conference after this announcement, as it almost always moves the Euro quite drastically. Any signs of potential easing will more than likely bring this pair back down all things being equal.
There are a ton of problems around the world right now that could cause a run back to the US dollar, and as such we think that a pullback is more than likely going to be seen in the relative short term. Whether or not this changes the trend would be a completely different discussion, and we don’t necessarily think it will. But will we see is an overextended market that needs to rise and perhaps pullback in order to find more buyers. With that in mind, we are fully willing to start selling the closer we get to the 1.3150 level, as long as we see some type of weakness.
There’s also the upside surprise, and if we get some type of solution out of Washington DC, this market will find the 1.3150 level a distant memory as it continues to gain over time.
Written by FX Empire