The EUR/USD pair initially fell during the session on Monday, but as you can see it appears that the level just below the 1.29 handle looks to be very supportive at the moment. In fact, over the last couple of weeks we have formed what looks to be a double bottom. Needless to say, this is a very bullish move.
Looking forward, I believe that we could see an attempt on the 1.30 handle in relatively short order. After all, the Federal Reserve FMOC meeting is today and tomorrow, and more than likely we will have some type of announcement during the press conference suggesting that the Federal Reserve could begin to ease even further, or simply expand asset purchases. Either way, this means that the Federal Reserve will be trying to weaken the US dollar further.
All is quiet in Europe... for now.
Lately it appears that the markets are willing to give euro up a little bit of a pass on some of its issues. The European Central Bank has expanded its asset purchases, or at least suggested that it would in the case of necessity, and as such many of the bond markets in the peripheral countries have stabilized a bit. This is without a doubt one of the biggest advantages going for Euro at the moment.
With this being said, more money will flow into Europe as people feel more comfortable with loaning those European countries cash since the central bank is willing to put a backstop to their debt. With that being said, people were willing to risk their capital for a higher return than they can get in the United States.
Going forward, I believe that we are starting to find a new consolidation area, and as a result I think that the market will continue to bounce around between the 1.29 and 1.3150 handles. Obviously, if we managed to get a breakout in either direction that would mean that you would have to follow the market going forward. In the meantime, I do feel that we have a slightly upward bias at this point.