The EUR/USD pair fell rather dramatically during the session on Monday, as we retested the 1.35 level for support. While I expected this move, I didn't expect it in a matter of few short hours and this of course has caught many of my fellow traders off guard. I have had conversations with several friends today discussing whether or not the validity of the uptrend is still there.
As far as I can tell, the 1.35 level is the site of a major breakout. This was the neckline of an inverted head and shoulders, and as a result I believe that we have much higher to go. In fact, I expected hit the 1.4950 before it's all said and done. With this being the case, I certainly don't want to sell this pair, and I look at this is a potential buying opportunity for many of my fellow traders.
Support
I believe this area could be supportive, but remember that these areas are just that - areas. In other words, a 1.3499 print does not mean that support is given way. In fact, these areas are generally zones and as a result any type of supportive candle between here and 1.34 still makes my analysis valid as far as I can tell.
I believe that the action that we've seen over the last 24 hours is a bit of a knee-jerk reaction to potential scandals, the biggest one of course being the idea that Prime Minister Rajoy of Spain could be implicated in corruption. However, so far there's been no concrete evidence, and the reality is that Spain is unlikely to suddenly stop with the austerity measures just because of one person.
With that being said, I believe that we will see this as a buying opportunity overall, and that eventually the buyers will step back into the market with full force. Certainly, the European indices were sold off quite brutally during the session, and probably far too much. With that being said, I believe that there are several people looking around the market for a doubt recognize this as a pullback that offers value.
