The EUR/USD pair initially fell below the 1.33 handle during the session on Thursday, but as you can see bounced enough to form a hammer yet again. This is the second hammer in a row, and that almost always means bullish action. The 1.33 level now suddenly looks like it wants to be a floor in the market, and as a result I think we will continue to see buying pressure in the Euro.
However, on this chart I do have a downtrend line off of the weekly chart that could offer significant resistance. Also, it should be noted that the various European indices look absolutely horrible. This is especially true when you are talking about the peripheral countries such as Spain, Italy, and Greece. With that being the case, is very possible that we will see headlines come across the wires that are very negative for the European Union in general.
It's the gift that keeps on giving
It's been a while since we've had problems with European debt, so I figure were about do. I don't know that were getting ready to do right now, bonds just above that they trend line would be a very convenient place to see this happen. After all, the stock markets on the condo look absolutely or will, and a lot of times they could be a bit of a harbinger on what happens with the currency. Also, we have to keep her eyes on bond spreads, and see how they are doing. This is especially true with countries like Italy and Spain. If the spread between German bonds and these countries continues to widen, the Euro will be sold off again.
As far as selling the market is concerned at the moment, if we managed to close below the 1.33 handle, I would be very bearish of this market because it would not only close below an obvious support level, but it would also close below two hammers. Signals like that don't come along very often, and I would suspect that it means a pullback to the 1.30 level is likely.
