The EUR/USD pair fell initially during the session on Tuesday, but as you can see found enough support to bounce and form a hammer for the day. This hammer of course is a very bullish sign, and it does tell us that this market once the keep on going up in value, perhaps to the top of the previous consolidation area which we see as the 1.34 handle.
The market will probably have trouble above that area, at least until the Federal Reserve makes its announcement about quantitative easing and whether or not it wants to taper off of it. That being the case, we feel that this market will be very volatile over the next several sessions. However, we do think that there is an upward bias in general between now and then, so therefore buying the pair is probably the only real trade that you have at the moment.
We think that short-term traders will do well in this market, and that every time the market falls for the short term we could have a buying opportunity. Look to the short term charts, as they will leave the way going forward. On top of all that, the European Union has just exited a recession which of course is a good thing for the currency as well, and it appears that based upon stock markets that the risk appetite is fairly strong out there at the moment.
With positive risk appetite, this pair typically does quite well. Remember, the Euro is essentially the “anti-dollar”, and as a result we feel that this market will more than likely continue to do well because of that if nothing else. On top of that, we feel that the market has made a significant low as the 1.31 handle, and we cannot short this market until we break well below that handle, because it shows so supportive action. The markets will continue to move on headlines obviously, and at this time of the year, there will be a priest liquidity suddenly, which could move the markets drastically in the blink of an eye.
Written by FX Empire