By: Christopher Lewis
The EUR/USD pair recently broke out of a resistance area that had been very difficult on the bulls. However, the pair hasn’t exactly caught on fire since then. The 1.3250 to 1.33 level was the resistance area that was so frustrating to the bulls, and now it looks as if it is going to be supportive – classical technical analysis.
However, there are a lot of potential landmines in the European Union, and because of this I am somewhat hesitant to own the Euro on the whole. As a perfect example, the Euro can’t gain on the Franc, which is being worked against by its own central bank! This shows just how weak the Euro is overall. Because of this, I haven’t bought this pair lately.
Tight market
The market in this pair looks as if it is going to be tight. The 1.35 level above is massively resistive, and it isn’t until we get a daily close above that mark that the bulls will have a lot of room to run. Quite frankly, the hammer from Monday looks well enough, but if you were to go long in this pair on a break of the top of it – you only have about 80 pips or so of room. This isn’t enough in my opinion to risk this.
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Yes, I do see that the upside is probably the more likely of the two, but I also see that the real support and resistance from a longer term point of view is 1.30 and 1.35. With this in mind, it is at these levels I wish to take any trades, and I believe that the more likely of scenarios is that we will see a pop in this pair, followed by weakness at the 1.35 level. Once that happens, I wouldn’t hesitate to sell this pair as it looks like we could see a move back down to the 1.30 level before it is all said and done. I simply don’t see the current support and resistance level at the 1.3250-ish level as anything more than a minor level.