EUR/USD
The EUR/USD pair went back and forth during the course of the session on Tuesday, and as a result it looks as if the market is going to struggle to go a little bit higher here. Ultimately, it is likely that the market will continue to go back and forth in the consolidation area that we have been in for some time. Because of that, I would fully anticipate that this market should turnaround and reach towards the 1.08 handle. That area is the bottom of the consolidation area, and I think that it is probably only a matter of time before markets turnaround again and again. This is a very tight market at this point in time, so you would have to look at the short-term charts for any signals.
GBP/USD
The GBP/USD pair had a volatile session as well, and as a result we ended up forming a hammer. That is a relatively supportive candle, and a break above the top of that hammer would be very positive. With that, I would anticipate that the market would then try to test the 1.45 handle. If we can get above there, I think that would be a very positive sign, probably sending this market looking for the 1.48 level again.
On the other hand, if we break down below the bottom of the hammer for the session on Tuesday, I think that this market could drop to the 1.42 level, and then possibly even as low as the 1.40 level which is a major support barrier. In the meantime, it is going to be volatile no matter what we do next, so it will take quite a bit of wherewithal to hang onto the position if we do get a move that can be traded. Ultimately though, I do prefer the US dollar on the longer-term charts.
