EUR/USD
The EUR/USD pair broke higher during the course of the day initially on Tuesday, testing the 1.1050 level for resistance. We did in fact find it there, so therefore we pulled back to form a shooting star. With this, it’s likely that we will continue to bounce around in this general vicinity, but at this point in time even if we break down below the bottom of the shooting star, I am not willing to sell the Euro. This is because of a couple of different things, not the least of which is the hammer that form for the weekly candle last week, which of course is a very positive sign.
Looking at this chart, I believe that a break above the top of the shooting star for the Tuesday session is a very strong signal, and that the Euro will continue to strengthen after that. My target would be the 1.13 level, although it would take some time to get there in my opinion.
GBP/USD
The British pound initially fell on Tuesday but found enough buyers near the 1.42 level to turn things around and form a hammer. We formed a hammer on Monday as well, so I think this is a fairly strong signal that we are going to go higher given enough time. There’s a lot of noise between here and the 1.45 level though, so I’m not necessarily comfortable going long at this point. It’s not that I don’t think we can get there; I think it’s more about the fact that it’s going to be very difficult to get there.
Alternatively, if we break down below the bottom of the hammer from the Tuesday session, we should then drop down to the 1.40 level after that. With this, I would be a seller as it goes with the longer-term trend, but I do have to admit at this point in time it looks like the market is somewhat stubbornly bullish.
