The EUR/USD pair gained slightly during the session on Tuesday, hovering around the 1.3350 level again. However, with the Federal Reserve making its tapering decision soon, this market will more than likely sit still and do very little as markets try to position themselves one way or the other. With that being the case, we are not interested in trading this pair, but do recognize that there are couple of major levels to pay attention to.
One particular level is the 1.34 level, because we think we break above that we will eventually try the 1.35 handle in relatively short order. On the way, we can get below the 1.32 handle, we think this market does break down significantly and probably head down the 1.31, and then possibly the 1.28 level if we get enough downward momentum. That being said, this will all be about the Federal Reserve and what it decides to do about tapering. If the tapering doesn’t fact happen, this will strengthen US tolerance in this pair much lower. On the other hand, with Europe coming out of the recession recently, and a potential pushback on tapering, this pair could go much higher.
We feel that this market will more than likely meander the next couple of days, still expect much in because of that we feel that it’s probably best to stay out, or at least play the options market if anything else. However, once the decision is made you can expect the final it moves in this market and probably a trade that will set up for several months going forward, possibly even years depending on what all is said and done. Above the 1.35 handle, we expect to see the 1.40 relatively quick. On the downside of, if we can somehow get below the 1.28 handle, we expect 1.25 to be had relatively soon, and then possibly the 1.20 handle. However, until we get those decisions we do not expect any clarity at all, and as a result will be waiting to see the market’s reaction as we think it will be a big enough move that even missing the first day won’t be that big of a deal.
Written by FX Empire