The EUR/USD pair fell slightly during the session on Monday, after bouncing around all day. As you can see, we are still below the downtrend line that forms the top of the descending triangle that I've been talking about, and as a result we still have plenty of resistance above. I feel that this market will essentially do nothing for a while, simply because we are at the very end of the summer, and nobody really knows what the Federal Reserve is likely to do. With that being the case, it's hard to garner some type of serious opinion as to whether or not quantitative easing continues or tapers off or whatever. I believe that's which are seen in the charts, confusion.
Descending triangle
If we break the top of this descending triangle, I believe that this market will go much higher. However, if we break down from here and below the 1.32 handle, I believe that we will eventually hit the 1.28 handle. That won't be an easy way to go forward, but that being the case I think a longer-term trade is possible under those scenarios.
In the meantime though, I expect this pair to do very little. The markets are simply killing time in late summer, and waiting to find out what the Federal Reserve will do. Because of that, it's almost impossible to imagine a scenario where traders are willing to throw a lot of money into the market knowing full well that they could be blowing it.
If we do break down below the 1.28 handle eventually, that will be due to quantitative easing being tapered off. If that happens, I would expect a huge move at that point as it would show that the Euro was completely broken. As far as going to the upside, I think you would have the usual suspects as resistance. I think the 1.35 level would be obeyed, as well as the 1.40 level as their both large psychologically significant numbers. However, I still think that we've got a little bit of time before we see any of these moves.