The EUR/USD pair rose during the session on Monday, breaking well above the 1.32 handle as we reenter the previous consolidation area. This previous consolidation area runs from the 1.32 area on the bottom to the 1.34 area on the top. That being the case, I feel that this market will more than likely continue higher, although it might be more or less a short-term move.
The Federal Reserve will continue to push the markets around, as they try to figure out what the board will decide as far as tapering is concerned. This of course will have a massive effect on the dollar itself, which will of course push this market around. Remember, the Euro is the "anti-dollar", and as a result the market will move rapidly against the currency one way or the other depending on what the Federal Reserve does of course.
The next couple of weeks could decide the next couple of years
The next couple of weeks should be very important in this pair, and as a result I think that we could see the beginning of the longer-term trend form in this general vicinity. I think that once the Federal Reserve makes its intentions known, the market can focus on what's going to happen with the US dollar, which of course is going to be what moves this market for the longer-term. After all, we know that the European Union is exiting recession, so it makes sense that the Euro would gain against the dollar, but if the Federal Reserve is indeed willing to taper off of the quantitative easing that we have seen over the last couple of years, this could really counter balance the exiting of the recession and push the value the Euro down.
I believe that if we can break above the 1.34 level on the upside, we should see a significant move higher. In fact, I would expect to see the 1.35 level first, followed by the 1.40 level. On the other hand, if we managed to break down and make a fresh new low again, we should see the markets break down to the 1.25 handle. In the meantime, this is going to be an interesting market.