The EUR/USD pair fell initially during the session on Wednesday, but as you can see bounced high enough to find the 1.33 handle. With that being the case, I think that we will continue up to the top of the recent consolidation area which find resistance at the 1.34 handle, but I have a hard time believing that we are to breakout above that without some type of headline crossing the wires.
Without a doubt the most important headline will be whether or not the Federal Reserve decides to taper off of quantitative easing, and until that comes out one way or the other, I just don't think the markets going to take that much risk on. However, markets do tend to get ahead of themselves at times, so a move above the 1.34 level on a daily close would more than likely head towards the 1.35 handle. Shorting at this point in time isn't something I'm thinking about, but I do recognize that we get a nice resistive candle at the aforementioned 1.34 handle, that could be reason enough for a short-term sell.
If they taper, things would turn around quick.
If the Federal Reserve was to taper off of quantitative easing, this pair is going to absolutely collapse. However, we do not know what they're going to do so taking a trade at this point in time is simply gambling, or just trying to guess what they're going to do. Because of that, I think that short-term traders are going to prefer this pair over long-term traders as there's only so much room to move before running into noise.
I think that a resistive candle at 1.34 will probably yield about 100 pips to the downside for buyers step back in, but I also think that it will be a rocky road regardless what we do. Going forward, I think it's ultimately up to the Federal Reserve, and between now and then were going to see a lot of nonsense in the marketplace as traders try to figure out what to do.
