The EUR/USD pair try to rally during the session on Wednesday, but as you can see struggle above the 1.3550 level. Because of this, it appears that the Euro is going to suffer again, but the real question is whether or not we can get below the 1.35 handle. After all, that is the bottom of the support area as far as I can tell, and as a result I am waiting for a daily close below that in order to start selling. If I get that, I think that the market will more than likely fall significantly, probably to the 1.33 handle. After all, the US dollar is strengthening in general, and as a result this market of course has been favoring the greenback lately.
On the other hand, if we managed to break above the top of the shooting star from the session on Wednesday, this would be a very strong sign and I believe that the market would go much higher. After all, the market would be breaking above significant resistance, and we could see a move all the way to the 1.37 handle without too many issues.
Pay attention to the Federal Reserve
The Federal Reserve will continue to be one of the biggest keys to trading this pair, as we still wonder whether or not the Fed can taper off of quantitative easing. That’s really the biggest question that the Forex markets are asking at the moment, and greatly influences the US dollar all around. However, as the Euro is the so-called “anti-dollar”, this pair will generally move to and fro based upon Dollar expectations more than anything else.
Keep in mind though, the Europeans have to worry about potential deflation, which of course is very negative for a currency. The ECB will more than likely have to do some type of monetary policy before it’s all said and done, and it’s possible that the market is trying to anticipate this potential action, thereby continuing to push this market lower and into the support area that we are fighting with at the moment.
