The EUR/USD pair went back and forth during the session on Tuesday as it typically does, but in the end formed a positive candle. This is a necessarily the clearest indication of a hammer, but it does look somewhat like one. Because of this, I feel that a break above the highs for the session she would signify that the market is ready to continue its bullish run and perhaps head towards the 1.32 level.
I believe that the 1.32 level will be a bit of a barrier to overcome though, and as a result I would be very quick to take profits if I was long of the Euro at that point. Full disclosure, I am not long of this pair, simply because I feel that the Euro is easier bought against other currencies at the moment. After all, there are a lot of questions surrounding the US economy and therefore the US dollar, with a special amount of attention paid to the nonfarm payroll numbers coming out on Friday. There seems to be consensus that perhaps the Federal Reserve isn't ready to cut back on quantitative easing anytime soon based upon the Monday disappointment in the PMI numbers, and as a result the markets will be very conscious of what happens on Friday's announcement. A good jobs number would be positive for the US dollar, simply because it means that the Federal Reserve is that much closer to cutting back on quantitative easing.
It's about the Federal Reserve, and nothing else at the moment.
I am actually old enough to remember the European Union and its debt crisis….Ok, so I am being sarcastic. But that's the point, the markets have completely overlooked any of the debt issues in the European Union, and as a result if we start to focus on those again, this pair could collapse. Truthfully though, I don't expect that to be the case as the markets have shown a willingness to cut the Euro slack all the way around.
What's going to truly move this market is whether or not the Federal Reserve is getting ready to cut back on quantitative easing. If they are, this pair will collapse at that point. However, if the jobs number is really poor, expect more dismal performance out of the US dollar, and that this pair could actually break the 1.32 level finally. In the end though, I still expect that we will be range bound for the foreseeable future. Remember, this nonfarm payroll number on Friday is only one data point that the Federal Reserve will pay attention to.
