The EUR/USD pair tried to rally during the course of the day on Monday, but as you can see really couldn’t hang onto any of the bullish momentum. Because of this, we ended up forming a little bit of a shooting star, which suggests that we could eventually break down. The 1.28 level below of course is supportive, based upon the massive support that I see on longer-term charts. I think breaking down below the 1.28 handle is going to be difficult to do, but seems to be fairly likely given enough time.
I also see a significant amount of resistance at the 1.30 handle, but I think any bounce from here is simply going to look for that area and offer a nice selling opportunity as the downtrend most certainly is still in effect, and the 1.30 level has already proven itself to be resistive. In fact, I think that there is massive resistance above at the 1.32 handle as well. In other words, I don’t see any need to start buying this pair, and simply sell any type of resistant candle above.
ECB and loose monetary policies.
The European Central Bank continues to talk about loose monetary policies. With that, I think that a lot of the concerns about deflation in the European Union will continue to weigh upon the currency, and as a result I think this market will eventually do the breakdown that I had mentioned. On the other hand, I would love to see some type of significant bounce in order to start selling as it would allow me to buy the US dollar “on the cheap.”
Looking at this chart, I see the possibility of a move down to the 1.25 level given enough time, and possibly even lower. The longer-term charts almost look as if they are suggesting a move down to the 1.20 handle. That is a long-term call of course, and the Euro seems to have nine lives. With that, rallies will continue to offer selling opportunities, but rallies will in fact come from time to time. Because of that, you will have to be patient, but if you are patient enough to look for resistive looking candles on longer-term charts such as the daily chart, you should find this market to be very profitable.
