The EUR/USD pair initially fell during the session on Monday, dipping below the 1.32 handle again. However, this move did not last that long and we did in fact find enough support at the 1.32 level in order to bounce. We didn’t necessarily have a massive move, but it does show that there is a certain amount of support in this general vicinity. Because of this, we feel that this market will more than likely consolidate in the general area, or perhaps try to make a move towards the 1.35 handle.
We don’t necessarily like the Euro in general, but it does appear that more bullishness is ahead. This is a short-term idea at this point in time, as we do not see a case for the Euro breaking out against the US dollar at the moment. This may simply be a technical move, and as a result we would be a bit cautious.
Also, there are more and more pundits out there suggesting that the ECB is going to cut rates sometime over the course of the next several months, and that of course should put a bit of resistance in the Euro going forward. Because of this, we think that any upside move is somewhat limited in this market, although the Federal Reserve will certainly do what it takes to destroy the value of the US dollar going forward. This is essentially going to end up being a battle between two central banks, one of which has a long storied tradition of currency disruption, and another of which is just learning that craft.
We obviously see a significant amount of support at the 1.32 handle, and a break below the lows from the Monday session of course would be very bearish. On the other hand, if we can move above the 1.33 handle, we would consider this market broken out, and that momentum had picked back up in order to continue much higher. In the meantime, expect a lot of short-term volatility in this pair as the choppiness overall continues.
Written by FX Empire