The EUR/USD pair broke down during the session on Monday, as global markets around the world essentially freaked out. The US dollar of course got pummeled because there seems to be growing speculation that the Federal Reserve will not be able to raise interest rates later this year. With that being the case, it wipes away most of the reason that the US dollar has gained so much recently. One of the most important things that I see on this chart is the 1.15 level. It is an area that I have suggested was where we changed trends, and we have most certainly blasted through it like it wasn’t even there. With this, I think the downtrend is over.
On top of that, you can almost make out an ascending triangle, which of course would measure 1000 pips. In other words, we should probably be reaching towards the 1.25 level given enough time. Don’t get me wrong, this isn’t going to happen overnight, but I think that is the goal at this point.
Massive triangle
Now that we broke above the 1.15 level, I feel that we are breaking an ascending triangle that should measure all the way to the 1.25 level. With this, I am willing to buy pullbacks as we go forward, and look at those dips as potential buying opportunities. It appears that the Federal Reserve may be backed into a corner at this point, and if that’s the case, the market will get what it wants. This wouldn’t exactly be the first time that the markets pushed the central bankers into doing something.
It used to be that the markets feared the central banks, but it has most certainly become the other way around over the last several years. With this, the 1.25 level really isn’t that big of a stretch, especially if we continue to see more doubt about the Federal Reserve funds rate. It is not until we break below the 1.14 level but I would consider selling now.