The EUR/USD pair rose during the session on Monday, shooting back above the 1.34 level. The area leads the way back to the 1.35 level, an area that was once significant supportive, which should be resistive now as well. After all, the old adage “what was once the floor becomes the ceiling” comes into play at this point.
The European Union could be slowing down, as the European Central Bank shocked the financial markets with a surprise rate cut on Thursday of last week. If this is the case, the recent weakness in the Euro should continue as the markets will certainly be worried about growth prospects on the continent. This is coupled with the so-called “fear trade”, which almost always includes buying of the US dollar as a safe haven asset. On top of that, the US Treasury markets get bid up as well, which of course also needs the traders to use Dollars – creating a bit of a vacuum in order to give the greenback strength.
1.35 is crucial to this pair.
The 1.35 level will continue to be one of the most important levels in this pair, as it is essentially my “switch” as to whether I want to be long or short of this market. Above the 1.35 level, I think there is real strength in the Euro, but as long as we can stay below it, I think money will continue to flow from east to west across the Atlantic.
The European Union economic numbers will be closely scrutinized going forward, as there will be serious concerns in the EU, as well as the rest of the world. This almost always favors America, as it is without a doubt the strongest economy at the moment, as it normally is in this type of situation. This of course has more and more investment in the US, as well as money leaving emerging and “riskier” markets back into New York. Going forward, I think the Euro is in a bit of trouble, and I am selling the first resistive candle that I see.
