The EUR/USD pair fell during the course of the session on Tuesday, breaking below the 1.37 level at one point in time. However, we found enough support to push the market back up and form a hammer, which under normal circumstances would be rather supportive. I still think that there is significant support down here, but what concerns me is that we have a shooting star from the Monday session which of course tells us the opposite. The fact that we had a shooting star followed by a hammer tells me that there is confusion here, and that taking a position until we break out in one direction or the other is probably a huge mistake.
With that, a break above the shooting star sits in this market much higher, probably back towards about 1.39 or so, where we should see significant selling pressure again. Breaking down below the hammer from last week would send this market down to the 1.35 handle in my opinion, and probably quite quickly.
European Central Bank
The European Central Bank offered words during the session that suggested that monetary policy easing could in fact still happen. The markets are starting to wonder whether or not it will happen during the June meeting, and as a result I believe that the Euro will continue to be a “sell the rallies” type of market. I really don’t have any interest in buying the Euro right now, at least not for anything more than a short-term trade.
On top of that, we are starting to head into the summer months, what we traditionally see less in the way of volatility. With that, I think we could be trying to carve out the summer range, which could be between the 1.37 level and the 1.40 handle. Even if we break down, I think that the range will at that point in time probably be defined by the 1.35 handle on the bottom, and the 1.40 handle on the top. Going forward, this pair will be what it would normally is - choppy at best.
