The EUR/USD pair made a strong showing during the Wednesday session as the Federal Reserve released the minutes from its July meeting. In the release was the impression that several of the members are more than willing to step in and ease monetary policy if the economy in the United States does not pick up soon. Needless to say, this was Dollar negative and the Euro benefited as a result.
However, it should be warned that the parameters for monetary policy to be eased are a bit vague at this point in time, and we do not know exactly what will trigger some type of action. Nonetheless, the markets do seem to take the side of imminent action, as the Dollar was sold off.
Going forward, this pair will be one of the more interesting ones as not only is it the most traded one, but it will also be the most convoluted one at times. On one hand, you have the European Union which is in an absolute mess right now. On the other side of the equation, you have the United States which could be easing monetary policy. Because of this, the interest rate differential will lean in the Euro’s favor, but at any given moment we could have some type of financial crisis in that area. In other words, it looks very much like we will continue to see a very volatile currency pair.
Rising wedge still in effect
The rising wedge that I have been talking about for some time is still being respected. As a matter fact, the absolute highs of the trading session on Wednesday stopped right at the top of this pattern. More importantly though, we are just above the 1.25 level which should start serious resistance all the way up to 1.27 or so. The next 200 pips in this marketplace to go to be very hard for the buyers to take control of. Is because of this that I am still bearish of this pair, but will be very picky about my entry.
I get an absolute ton of messages about this currency pair. One of the biggest problems that Forex traders make is that they seem to want to trade only this pair when they are relatively new in these markets. Someone somewhere told them that this market is the "easiest" to trade. Or perhaps the "safest" to trade as well. While this was true a few years ago, nothing could be further from the truth now. My single biggest piece of advice is that as the market does look bullish, we are heading into a ton of resistance. This makes for a very difficult trading environment, and quite frankly I am more than willing to wait until this pair shows a nice set up to the downside before I get involved. There are other pairs out there to trade and quite frankly several easier trade setups at the moment.