By: DailyForex.com
The EUR/USD pair initially fell on Monday, but found the 1.30 level supportive yet again, and we bounced in order to form the third hammer in a row. For me, this is a very significant signal, and I believe that this market will continue to go higher from this point in time. However, we have not broken above the top of any of these hammers, so there is still the possibility that we do not go higher. I typically will wait into we get above those highs in order to start buying.
That being said though, it is a very negative sign if we managed to break down below the 1.30 handle, not only because it breaks the level itself, but it also breaks the back of three hammers. If that's the case, I can almost guarantee that we would at the 1.28 handle, something that I hardly ever say. That is probably the most negative sign that I can imagine at this point time, and because of this I feel that this market is more than likely going to make a significant move in one direction or the other soon.
Weekly downtrend line
The weekly downtrend line is on the chart as well, in red. I do not believe that this market will get above that level anytime soon, so I think it even if we break higher, it is going to be a short-term move. This pair has been very choppy over the last several months, if not couple of years, and I see nothing that suggests that it's about to change.
Ultimately though, when you look at the longer-term charts you can make an argument for eight additional the ascending triangle, which of course has support at the 1.28 handle. If we break down below there things could get really ugly, and I do think that the 1.25 level would be aimed for almost right away. However, we are a long way from doing that, so I think in the meantime we will more than likely see an attempt to reach the 1.34 handle.
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