The EUR/USD pair had a negative session on Friday, bouncing down from the downtrend line that we've seen form the larger descending triangle over the last several months. That being the case, I think that we are not quite ready to break out yet, but it is starting to look more and more likely at this point in time. With that being the case, I think that a break above the 1.34 level on a daily close is what it is going to take in order to convince me to start buying.
On the other hand, if we do fail from here and manage to move below the 1.32 handle, I believe that this market will start to fall and grind its way back down to the 1.28 handle. That level is the bottom of the descending triangle, which would if giving way to the sellers, signal a much larger move lower.
I'm getting tired of saying this, but it's all about the Federal Reserve.
The markets are currently trying to figure out what the Federal Reserve is going to do about tapering off of quantitative easing in the month of September or October. As things stand right now, it looks very back and forth and wishy-washy at best. This is why I believe that the markets have been so out-of-control lately with indecision. It's not just in this market, it's in all markets.
Expect a lot of choppiness in the short term, and also expect a lot of confusion. The fact that we are in the middle summer is not helping the situation either, as a lot of the "big money" isn't even at work right now. Because of this, a lot of these moves simply cannot be trusted until we get some type of clarity of the Federal Reserve, which is something that is sorely lacking. It's truly ironic though, because one of the new mandates of the Federal Reserve is to communicate its policies to the public in a much clearer manner. So far, the Federal Reserve has completely failed at that.