The EUR/USD pair attempted to rally during the session on Wednesday, but found significant downward pressure above the 1.31 resistance area. We believe that this area goes all the way up to the 1.3150 level, so it would not be surprising to see this market pullback at this point. However, there are also signs of support right around the 1.30 level as well.
Because of this, we feel that this market is set up to pullback, and then bounced to continue higher. Whether or not we can break above the 1.3150 level will more than likely be predicated upon congressional talks in the United States more so than anything that’s going on in Europe or the financial markets itself.
Because of this, we expect more volatility, and choppiness in a relatively tight range like this wouldn’t be much of surprise. However, if you are shorter-term trader 150 pips is a wide enough range in order to take advantage of the market moves and the headline reactions in order to profit.
If we do manage to get above the 1.3150 level however, we could see continued bullishness. It must be remembered that there is a significant amount of resistance above based upon the longer-term charts, and as such gaining above that level will be a bit more difficult than we have seen over the last couple weeks.
Alternately, if we do pullback it looks like its fairly clear shot all the way down to the 1.30 level. It is below there that we really start to see significant support which extends all the way down to the 1.29 level. If we get below 1.29, there is actually nothing stopping us from going to the 1.27 level after that.
We do have the ECB having an interest-rate announcement during the session, but what’s good be more important is going to be the news conference afterwards. Depending on how that goes, we could have a market moving event in and of itself. We still would need to see these areas listed above as being broken in order to make a trade though.
However, is going to be more likely that this market suddenly go sideways for the next couple of weeks. This is been a very volatile pair, and most moves that will be done in this marketplace will be based upon either some type of financial agreement in the United States, or simply profit-taking at the end of a very long year for hedge funds. As we get later into the month of December, the liquidity will become less and less, and this will open up the door to exaggerated moves that happens suddenly. By the time December 15 rolls around, we could have an extremely volatile market. However, we think this should be a fairly quiet market between now and then.
Written by FX Empire