The EUR/USD pair did very little during the session on Friday, but the one thing that it did show me that is important is the fact that the 1.38 level should be somewhat supportive. I had suspected this previously, and the fact that we couldn’t fall below it certainly is a good sign. I think of this market will find support all the way down to the 1.37 level without too many issues, so some type of supportive candle here would be bought.
Looking at this chart, I think that we are still in a pretty decent uptrend for the short-term, but I do wonder about it for longer-term trading. After all, the area that we pullback from was a significant downtrend line on the monthly chart, and as a result I feel that the pullback is indicative of significant resistance that should continue to keep the market somewhat hindered.
Federal Reserve and the ECB.
The Federal Reserve in the ECB of course will be the main drivers of this pair going forward. The Federal Reserve is currently looking to tighten its monetary policy longer-term, as quantitative easing starts to wind down. Recently, the European Central Bank surprises that the world when it basically made it known that it had no interest in loosening monetary policy, something that most people thought would happen. With that, the Euro did in fact get a bit of a boost because of it.
With all that being said, I feel like this market is going to continue to chop around, and until we clear the 1.40 level, I don’t think the longer-term buy-and-hold approach can work in this market. However, the 1.37 level below should offer quite a bit of support as well, so is not until we clear there that I feel you can start selling with any serious confidence. Even in that scenario, I would expect a lot of choppiness going forward, but we could drop to the 1.35 level if we do get that move down. In the meantime though, I believe that short-term trading will continue to pushes market back and forth.
