The EUR/USD pair fell during the balance of the session on Thursday, but as you can see bounced enough in order to form a nice looking hammer just above the 1.3350 handle. Because of this, we feel that there is still a significant amount of support in this marketplace, and that the Euro will more than likely continue to climb against the Dollar. We predicated upon the Federal Reserve and what they are going to do, but right now it looks like the market is more than willing to speculate that tapering is not in the cards.
We are as convinced now, but in reality it doesn’t really matter what the truth is, just what the market thinks. Right now, looks like they are betting on the Euro to continue to appreciate against the Dollar, so that’s essentially all we have to work with. On a break of the highs from the session on Thursday, we see this as a buy signal that could go much higher. Granted, we are in the dead of summer and there is a lack of liquidity, but in reality it appears that the market is trying to position itself before the September announcements.
That doesn’t mean that the markets will be correct, just that the markets are leaning in that direction. Quite often, the markets decide what they would do before the announcements come out, so what the Federal Reserve decides to do about tapering may or may not even matter. It really comes down to how far the market has moved before the make up there decision.
Going forward, we think that any move above the 1.350 level would be massively bullish, and should send this market towards 1.40 handle before it’s all said and done. Expect a lot of volatility, but in reality it does look like the Euro will more than likely continue to gain against the Dollar. Adding fuel to the fire, Europe has just come out a recession which of course is very positive for the currency as well. As for selling is concerned, if we managed to break the bottom of the hammer, we could see a little bit of a selloff, but in reality to feel comfortable selling, we would like to see a daily close below the 1.32 handle.
Written by FX Empire