The EUR/USD pair fell hard during the session on Wednesday, slamming into the 1.35 handle. This area of course has been rather supportive over the last several weeks, so it's no surprise we get a little bit of a bounce from there. In fact, when you look at the shorter-term charts, there is actually a nice hammer forming on the four-hour timeframe that suggests that we are going to go ahead and bounce from here. Because of this, I am very bullish of this pair for the short term at least.
Perhaps the announcement of Janet Yellen as the likely Federal Reserve Chairperson next term has work against the value the US dollar overall, and this simple pullback could get more traders to work against the Dollar also. Remember, the euro is the "anti-dollar" as far as the currency markets are concerned, so as the Euro goes, the dollar typically follows the inverse pattern.
EU exits recession, Federal Reserve still looks lost.
The European Union has exited a recession, which of course is normally good for a currency in general. The Federal Reserve still looks lost as usual, as they do not really know what it is that they should be doing. After all, the employment picture isn't exactly rosy in the United States, and that of course has several of the members worried about whether or not they can taper off of quantitative easing. Without a doubt, the tapering question has been the foremost concern of the currency markets for months now, and the fact that the Federal Reserve seems likely to stay put certainly is negative for the dollar.
If we do see a bit of a breakdown from here, I just do not see this market going below the 1.34 handle, as it is significant support as well. That being said, I believe that this is a "buy only" type of market for at least the next couple of weeks, if not couple of months. In fact, it would not be surprising at all for me to see the Euro hit the 1.40 level between now and December.
