The EUR/USD pair fell during the session on Tuesday, but as you can see there was a bit of a bounce towards the end of the session, showing that there is underlying support. Although we broke down below the 1.32 support level, it seems to be a "thick zone" going a bit lower, and as a result I believe that the fact that we formed a hammer during the session on Tuesday as no mistake. After all, how likely is it that we are going to see the pair break down below the support area before the Federal Reserve makes its decision on whether or not to taper off of quantitative easing?
Until that decision is made, it's hard to believe that there are any long-term trades to be had in this market. Quite frankly, I believe that if this market goes above the highs of the hammer, we will more than likely see this market go back into the previous consolidation area, between the 1.32 and the 1.34 levels. With that being the case, I think there is a short-term buying opportunity, but in reality you're going to have to be very careful about how long you hang onto any trade in this market. In fact, a lot of professionals I know are simply sitting on the sidelines until the Federal Reserve makes its intentions known.
But wait, there's more!
On top of the problems with the Federal Reserve and trying to guess what they are getting ready to do, nonfarm payroll comes out this Friday, and that of course will move the markets drastically if the numbers are a bit of a surprise. That being the case, I feel that this market could be very erratic in the short term, and that's why I would be very quick to take profits. There simply going to be far too many headline risks out there, and as a result it will take a massive amount of fortitude to hang onto the trade for any real length of time. As for afterwards, I believe that we will get enough clarity in order to make a longer-term trade. But until that announcement comes out, expect a lot of drama.
