The EUR/USD pair rose during the session on Monday, breaking the top of the hammer from the Friday session, so it appears that the market is ready to continue going higher. This is interesting, because the hammer that was formed on Friday was in fact based upon the 61.8 Fibonacci retracement level. On top of that, you can see that we have the 100 day exponential moving average plotted as well, and it has offered a significant amount of support as well. Based upon the hammer, the moving average, and the Fibonacci retracement, it’s not hard to believe that buyers will be stepping in at this point in time in order to continue to buy the Euro.
The market has been in a choppy uptrend for some time now, and faced a significant amount of resistance near the 1.40 level, an area that is where the monthly downtrend line intersected the recent price action. That area caused enough of selling that the market pulled back to the 61.8 Fibonacci level, which of course is a very common.
We now have a situation where the bottom of the hammer from the Friday session might be considered the “floor” in this market, and as long as we stay above there will probably be a bit of a bullish tone to the Euro. A move below that level however would of course be very toxic for the Euro and could be the sign that the market is finally going to break apart. There are plenty of reasons to think that it could happen, but quite frankly the Euro tends to have “nine lives” like a cat as it seems like no matter what happens, it will almost always get a reprieve sooner or later. In fact, we know traders the do nothing but by the Euro over the longer term. However, with all of the moving parts going on right now, you have to keep an eye on the Federal Reserve, and that will more than likely continue to make the market choppy as the Fed continues to work on tapering off of quantitative easing.