The EUR/USD pair rose during the session on Monday, bouncing off of the lows that we had put in last week. However, we did give back a significant amount of the gains, so now we are left wondering what happens next. It looks like the 1.3350 level is going offer a significant amount of support, and the selloff may have been a bit extreme coming into the session.
Looking at this candle though, we do see that it is going to be a fight to go higher. However, the knee-jerk reaction that we saw from the head of the ECB, Mario Draghi, mentioning that the value of the Euro was too high, may have presented a buying opportunity. In fact, you have to remember that when you were trading currency pairs, you are in fact trading one currency against another. In this particular case, you are trading one central bank against the other.
The Federal Reserve can print currency like nobody else’s business, and we find it hard to believe that the Federal Reserve will be out done by the European Central Bank. The markets natural proclivity is to sell the US dollar over time, and as a result we believe that there is probably more bullishness left in this market.
Within this chart, it is very possible that we can go as high as 1.37 and still be within a potential consolidation area. We believe that as long as we can hold the present area, we should see buyers stepping into the marketplace as they begin to reassess what will actually happen in the euro zone when it comes to monetary policy.
Alternately though, if we do see the market break below the 1.3250 level, we would consider this a bearish turn of events. If that were to happen, we would start selling. Until then though, it seems like there’s far too much noise and support below in order to consider selling with any great confidence. It still looks to us that the path of least resistance is definitely higher and not lower.
Written by FX Empire