The EUR/USD pair fell during the bulk of the session on Friday, but bounce slightly at the end of the day when we tested the 1.36 level. However, we have broken down below the support area that was formed last week, and now it appears that this market is in fact going to drift to the next major support level, the 1.35 level. Down there, we should see significant amount of buying pressure though, because it is a large, round, psychologically significant number. A lot of orders will be based around that number, so I cannot help but believe that there will be a bulk of orders there. Also, on longer-term charts there is the precedents for this level to be one that causes the market to react.
Even if we get a bounce here, I’m not interested in buying unless of course we clear the 1.3750 level, which for me would show a significant turnaround as far as momentum is concerned as we have certainly broken through quite a bit of support already.
I see continued Euro weakness.
I believe that we will see continued Euro weakness in the short term, and the European Central Bank meeting in June will more than likely be what the market waits for. Between on that, I believe that the Euro is going to be a bit soft as people simply do not want wait for the central bank to tell us that it is expanding monetary policy. The loosening of the monetary policy should continue to work against the value the Euro, and then the real question will be whether or not the 1.35 level is going to hold. It’s a bit difficult to tell now, because I believe that will be based solely upon the fundamental announcement, and very little to do with technical analysis as central bank announcements quite often can cause a rethinking of everything that goes into technical analysis anyways. With this, I believe that selling short-term rallies will probably be the best thing you can do between now and the aforementioned meeting.
