The EUR/USD pair tried to rally during the course of the day on Tuesday, but as you can see found quite a bit of resistance at the 1.29 handle. This area has been relatively important over the last couple of weeks, but it is a minor area in the larger scheme of things. When I look at this chart, I recognize of the 1.28 level is important based upon the weekly chart, as it has been supportive in the past. On top of that, it is also the 61.8% Fibonacci retracement level from the move higher at the absolute bottom, as well as an obvious support area based upon the large, round, psychologically significant number itself.
The fact that we formed a shooting star during the session on Tuesday tells me that more than likely the downward pressure is going to continue. That doesn’t necessarily mean that we are going to see some type of collapse in this market, I don’t expect that at all. What they do expect to see is that rallies will continue to be sold going forward, as seen during the session on Tuesday.
Hard trend to fight.
I believe that the 1.30 level been broken to the upside would make it possible to go countertrend at the moment, but right now I just don’t see that happening. Playing devil’s advocate, if we do break above the 1.30 handle, I think that the market would then go looking for the 1.32 level, which was the gap from a couple of weeks ago and should be rather resistive.
On the other hand, I believe that eventually we will possibly see a break down below the 1.28 handle, but it’s going to take a significant amount of momentum to do so. Once that happens though, this market could drop as low as 1.20 given enough time. I know that’s a bold call, but if we get below 1.28, I don’t see that being completely impossible. It would be a long-term call obviously, but that’s how important this area is to the longer-term health of this pair.
