The EUR/USD pair went back and forth violently during the session on Monday, but found enough support down at the 1.3750 level to turn things back around and bounce quite a bit higher. That being the case, the market is positive looking at the moment, but ultimately I have a hard time believing that this market is going to continue to be extraordinarily choppy. Looking at the longer-term charts, the 1.3950 area is roughly where the monthly downtrend line comes to, and the fact that we fell from that area tells me that there is still a significance to that downtrend line. It started back at the beginning the financial crisis, and can be seen on the monthly timeframe.
This pair should continue to chop around, mainly because there are so many different things going on at one time. Just above, we see a significant amount of noise as far as I can tell, and then the way should continue to keep the sellers at least into the market. However, I see quite a bit of support below as well, so quite frankly it’s just difficult to take a position for any real length of time.
Two central banks.
Remember that this pair has two central banks that are essentially able to drive the currency market in one direction or the other from a simple statement. The Federal Reserve suggesting that the short-term interest rates will be 1% by the end of 2015 of course put quite a bid into the US dollar recently. At the same time, the European Central Bank holding still on its monetary policy caught some people off guard, as many had anticipated easing out of the EU. Because of this, this market continues to hinge on the words of central bankers, which of course can be errant at times.
That being the case, I believe that trading short-term moves will be the only way that one can make money in this market for the foreseeable future. However, a move above the 1.40 level makes us a long-term uptrend, just as a break below the 1.37 level could have extremely bearish implications.
