The EUR/USD pair rose during the session on Tuesday, but as you can see struggle to get above the 1.36 level. That being the case, I believe that this market will continue to consolidate sideways, and that makes a lot of sense considering that this Friday as the nonfarm payroll report. Remember, the entire world is focused on what the Federal Reserve will or will not do, and it has already been stated that tapering off of quantitative easing will be greatly influenced by the employment situation in the United States. That being the case, it's hard for me to believe that a lot of the large money traders are going to be placing massive bets ahead of that report.
Since we formed a shooting star, I believe that we are simply going to fall slightly and down to the bottom of the recent consolidation area. That bottom is roughly near the 1.3450 level, but I see support at the 1.34 level as well. In other words, this market will more than likely be fairly tight over the next several sessions.
The reaction on Friday will be massive to future direction
I still believe that this comes down to the Friday numbers. If there are strong numbers out United States, that could give the market anticipating tapering, which should send this pair down rapidly. On the other hand, if the employment number and situation continues to look bleak, we could see this pair break the top of the shooting star which of course is a very bullish sign as far as I'm concerned.
All that being said, you never really know when the moves going to happen. Although I believe it won't be until after the nonfarm payroll number on Friday, the truth is that anything can happen between now and then. Because of this, I believe that a daily close above the 1.36 handle is the buy signal that traders will be looking for. At that point time, I would not hesitate to start buying the Euro as it should more than likely head towards the 1.40 level. As for selling, I do not have a scenario in which I do so at the moment, and that of course would be contingent on what happens during the Friday announcement.
