The EUR/USD pair initially fell during the session on Tuesday, but found support at the 1.3350 area in order to bounce and turn the market around showing significant support and momentum higher. The candle is kind of a strange shape; almost hammer like, but at the end of the day we still find the 1.35 level above offering resistance.
Looking at this chart though, you cannot deny that the momentum is definitely with the buyers in this market, and as such I am much more apt to buy the Euros and sell it. I also believe that this is essentially going to be a battle between two central banks, and which one can "race to the bottom" quicker. Nobody and I mean nobody can destroy and devalue their currency like the Federal Reserve. Quite frankly, the European Central Bank is way out of his league in this game.
Also, you have to keep in mind that 17 nations need to come together in order to do anything major. Because of this, I have a hard time believing that the Europeans will have some type of cohesive reaction over the long-term, while the Federal Reserve simply prints off new greenbacks.
1.35 And beyond
I think that the 1.35 level will offer a bit of resistance, but it will only be temporary in its nature. It's obvious to me that the market is starting to look for a bit of a "risk on" type of move, and while the Euro isn't necessarily the ideal instrument, it isn't the Dollar and that is good enough sometimes.
We recently broken neckline of a head and shoulders pattern that suggested we were going to go as high as 1.50 before the move was over. I still believe in this, but I think that we are going to have some type of serious choppiness going forward. With this being the case, I think this market will continue to shake out the so-called "weak hands" over and over. All things being equal, I will be buying this pair on short term charts showing pullbacks that find support.
