The EUR/USD pair broke out to the upside during the session on Wednesday and cleared the 1.10 level as weaker than anticipated GDP numbers came out of the United States. Expected to be 1%, the announcement actually was 0.2 %, and that of course is a massive miss. Ultimately, the US economy continues to be the focus and as a result traders anticipated that the Federal Reserve would release a very dovish statement later in the day. That didn’t happen, and that caused a bit of confusion. With this, the market looks confused, and we recognize that there is still a significant amount of resistance at the 1.12 level. We believe that the market will continue to bang around between the 1.10 and the 1.12 levels in the meantime, and we anticipate this market been very volatile to say the least. However, we would be remiss to ignore the fact that we did break out. Ultimately, this is a marketplace it looks like it’s trying to reach higher levels but we do not anticipate the trend to change completely. In order to do so, we would have to reach the 1.15 level, something that isn’t going to happen anytime soon.
If we did fall below the 1.10 level, we would become massively short of this market as we should then drop a couple of hundred pips right away. This would be a very negative sign, and could see this market going as low as 1.05 given enough time. We have no interest in selling at the moment, but we do recognize that the possibility does exist that we do break down again. If we do, and will be interesting to see where we go from here, but quite frankly it would not surprise us to see continued volatility in choppiness. More than likely, this will continue to be the domain of short-term traders as high-frequency firms have entered the Forex markets over the last couple of years, and of course the EUR/USD pair is one of their favorite markets to participate in due to the small spread.