EUR/USD
The EUR/USD pair fell significantly during the course of the day on Tuesday, but most importantly broke down below the bottom of the hammer from the Wednesday session. This tells me that we are starting to get a bit more bearish pressure in this market, as we have dropped below an area that quite frankly should have been extraordinarily supportive. Because of this, I think that we will continue to grind down to the 1.11 handle, which of course is an area where we have seen quite a bit of support recently. On the other hand, if we can break above the 1.12 level above, this market could continue to go higher. Ultimately though, my default scenario is to start selling.
GBP/USD
The British pound of course fell bit during the course of the session on Tuesday, testing the 1.30 level below. This is an area that of course would be rather supportive, but I don’t think that the market will be a lot of break down below there easily, and as a result I think that we will probably bounce and then look for selling opportunities above. Exhaustive candles after short-term rallies will provide nice opportunity to take advantage of “value” in the US dollar. I do think that we break below the 1.30 level given enough time, and then reach down to the 1.2850 level which was the absolute bottom recently.
If we break down below there, the market should continue to go down to the 1.25 handle, which is my longer-term target. At this point, I don’t really have much in the way of a scenario to start buying, so with this being the case it’s very unlikely that I will even pay attention to buy signals, as the gap above should continue to offer a bit of a “ceiling” in this market overall.
