The EUR/USD pair attempted to rally during the session on Thursday again, but just as it did on Wednesday it fell short of clearing the 1.33 handle. Looking at this chart, you can see that we've had to shooting stars in a row, and this is normally very bearish signal. However, we are currently above significant support at 1.3150, so I look at this is a bit of a "false signal."
Looking at this, I think that if we can get above the highs from Wednesday, we could go much higher. However, the area above 1.3150 was always going to be difficult as it was very noisy. Looking forward, I think we will have a lot of choppiness with an upward bias. There are a few things that can derail bullishness obviously, but in general I think that the market "wants" to grind higher.
A few things to watch
One of the first things you have to pay attention to is the so-called "fiscal cliff” talks going on in Washington DC. You have no idea how bored I am with typing that last sentence, but it is true. If this thing gets derailed, there is a good chance that this pair will fall as the totality of risk appetite will suffer.
Another couple of things to pay attention to would be both Greek and Spanish bonds. Over the last couple of months, the yields have gone down in both of these markets, and this shows that there is the beginning of some confidence in the European debt markets. This is very positive for Europe on the whole, even though that region is certainly going to be in recession for some time.
The 1.3150 level should be supportive going forward, so I think that this area will hold up against any fall that we see. However, headlines can and will throw this pair round especially at this point in the year as the volumes will be so low. Going forward, I would highly recommend being very diligent with your stop losses, or possibly even staying out.