The EUR/USD pair fell initially during the session on Thursday, but as you can see bounced hard enough to challenge the 1.35 handle again. Nonetheless, this market does look like it's broken down a bit at this point, and the extraordinarily weak candle from the Wednesday session has me thinking that this market will more than likely chop around in this area, and then try to find another excuse to fall apart. However, I do believe that ultimately we have a bit of a trading range, with the 1.33 level on the downside being support, and the 1.36 level on the upside being resistance.
Remember, the European Central Bank did the surprise rate cut last week, and has even threatened to do miniature cuts forward from here. If that happens, you can expect the Euro to depreciate over time, and that of course will help out the US dollar, which has a central bank that is now starting to explore the possibility of tapering off of quantitative easing, the first major central bank to do so.
All things being equal, I think that this market is probably going to be very volatile, and unfortunately very dangerous. That has been the way this market is been for large periods of time over the last couple of years, as the world continues to try and figure out which side of the Atlantic is safer to have your money invested in.
Watch the Federal Reserve, and jobs numbers out of America.
I believe that the jobs numbers out of the United States will by far be the most important economic indicator for this pair, and as long as they improve over time, I think that this pair is going to have sellers stepped into the marketplace. The first-time unemployment claims that came out during the session on Thursday. Certainly suggest that the economic conditions are getting better in the United States, lease from John standpoint, and that of course could have the Federal Reserve tapering off of quantitative easing sooner than anticipated. Don't know that I believe that right away, but it is what the market is focusing on, so we have to take it at face value.
At this point time, I feel much more comfortable selling on a resistive candle if I get it, or break of the lows from the Thursday session. I think that if we do fall from here, 1.33 will be very important, and should bring in support. A break below there has market heading down to the 1.30 handle relatively quick, and will more than likely catch a lot of traders off guard.
