The EUR/USD pair showed strength during the Monday session, breaking above the recent shooting star from last Thursday. The candle suggests that we were perhaps going to break down below the 1.30 handle, but the action for Monday suggests the exact opposite. Because of this, I believe that this market will continue to confound the most traders, simply chopping sideways overall.
The fundamental action in this pair is very difficult to gauge as the European issues seem to be somewhat endless. The debt problems have not gone anywhere, and the banks are still vulnerable. However, it does look like some progress is being made in Italy now, so we could see at least that problem go away. Truthfully, I believe that the biggest friend that the Euro has is the Federal Reserve. As long as they are hell-bent on destroying the value of the US dollar, this pair will remain somewhat buoyant.
Consolidation
I believe that we are currently trying to find a consolidative range for the warmer months. After all, the currency markets tend to be relatively quiet during the summer, and that time of year is rapidly approaching. At this moment time, I see the 1.32 level as significant resistance, just as I see the 1.30 level as significant support. I see nothing on this chart that makes me believe that we are going to break out of this range anytime soon, although I of course could be wrong.
If we do breakout of this range, it will almost certainly have something to do with a headline somewhere. This is an extremely emotionally charged pair recently, and as a result has been known to act irrationally to various headlines as they get released. Looking forward, I think that this could be the range that we see over the next couple of months, but I would not rule a breakout out of the question. If we do see a move below the 1.30 level, I think this pair will go back to the 1.28 handle before it's all said and done. Alternately, a break above the 1.32 level will lead to the 1.35 handle.
