EUR/USD rose during the session on Tuesday initially, but as you can see found far too much in the way of resistance at the 1.37 level, thereby turning back around and forming a shooting star. This move makes complete sense, as the Federal Reserve Chairperson Janet Yellen testified in front of Congress during the session that the Federal Reserve was on track to continue tapering. This of course drives up the value for US dollars as bond market selloff, and it makes sense that the Euro gets punished as a result. The real question is how much farther can we fall from here?
For me, the easy answer is the 1.35 level, as it looks to be a major support area. That being said, I am more than interested in selling this market for the short-term, aiming for about 100 pips if we can break down a little bit from here. I would also expect support down at the 1.35 level, so it’s very possible that I get a buy signal down there to reverse the trade.
Below 1.35, things get very interesting.
While I don’t necessarily expect this to happen right away, if we manage to break down below 1.35, I think this market gets very interesting. We would more than likely fall to the 1.33 level first, and then possibly the 1.30 handle. This could actually happen, as the European Union continues to struggle with many of its own issues. It really comes down to what the traders are focusing on at the moment, and right now they seem to be focusing on the United States. This pair has a bad habit of going from one side of the Atlantic to the other as far as focus is concerned, so I feel that it’s only a matter of time before we start to worry about things in Europe.
When that happens, this pair could break down. I don’t really see a catalyst for this pair to go through the roof at this moment in time, so I am inclined to trade short-term charts with a slightly negative bias.
