The EUR/USD pair went back and forth during the session on Monday, as we continue to struggle with the downtrend line that forms the channel going lower from the start of the financial crisis. I have stated repeatedly that this area matters, and as a result I believe that the intelligent trader will stay out of the market at the moment as we could be getting ready to find a massive move in one direction or the other. Quite frankly, it doesn’t matter to me which direction this market moves, as we should see follow-through over the longer term soon.
If we break above the shooting star from the Friday session, we believe that this market’s going to go much higher. How much higher? That’s still remains to be seen, but 1.50 would not be a stretch of the imagination. Granted, it won’t happen in the next few weeks, but more or less over the longer term.
On the other hand, if we start to fall apart here things will become very interesting. The 1.38 level should offer support, and until we get below there it’s difficult to be short of the Euro. However, you have to keep in mind that we have recently had the European Central Bank suggest that it was not going to loosen monetary policy anytime soon, and even though there are a lot of people out there that believe they will have to, the truth is that the ECB tends to be more hawkish than the Federal Reserve anyway. That’s one of the major reasons why this pair continues to go higher, over the longer term.
Ultimately, this pair is at a major inflection point. I suggest that over the next couple of weeks, we should see the beginning of a trend. The question now becomes which direction, but then again that’s the great thing about currency trading – it doesn’t matter. Unless you are looking for just a handful of pips, being patient and loving the market tell you which direction it wants to go could pay off quite well on a long-term trade.