The EUR/USD pair initially fell during the Thursday session, but found enough buyers to push the market back up and form a hammer. This hammer since just below the 1.36 level, and we believe that the Friday nonfarm payroll numbers will of course move this market.
The 1.35 level had been significant resistance previously, and now should be a bit of a “floor in this market. As many of you have read on our earlier reports, we believe this 1.35 level to be a significant neckline from a massive inverted head and shoulders pattern that has been forming over the last several months. Because of this, the action on Wednesday was actually very important to the future of this pair.
The fact that Thursday didn’t see much of a pullback, and that the pullback we got was simply gobbled up by the bullish traders out there suggests to us that there is still plenty of appetite by the Euro. If that’s the case, knee-jerk reactions are exactly what we want to see in order to add to our significant position.
There will be times when the market pullback, but we now see this is a long-term buy-and-hold opportunity. The Euro seems to be favored at the moment, and the Federal Reserve has recently suggested that rates and asset purchases will be elevated for the foreseeable future, and this of course has the market thinking that the Fed will continue to try and devalue the US dollar.
On the other side of the Atlantic, the European Central Bank has essentially said that it has no plans to implement any type of monetary policy going forward. In other words, they are willing to keep rates right where they are at. If that’s the case, we should see a sustained move higher in this market as the US dollar continues to erode in value. This is essentially the “norm” of this market since 2001, and it appears that we are heading back towards a “buy on the dips” type of currency pair again. We see absolutely no reason to sell this market at this point in time.
Written by FX Empire