The EUR/USD pair fell during the session on Wednesday as the shooting star on Tuesday got triggered to the downside. The pair is currently drifting higher in what is known as a rising wedge formation, and this of course is rather bearish. However, it should be noted that we haven’t broke down through the bottom of this pattern, so we really don't have a massive sell signal yet.
Looking at the signal from the breaking down of the bottom of Tuesday's shooting star, this would've been a short-term trade at best. The real support is found in the uptrend line of the rising wedge, and as such that will be the signal that will get me selling this pair in earnest.
Even though it looks like we have a bit of support at the moment, it should be kept in mind that this is the low liquidity part of the summer break, and many of the large traders will be away at holiday. Because of this, you can only take so much of this current action seriously, and common sense indicates that the Euro should continue to fall overall.
I personally see 1.25 as the epicenter of a massive resistance area that runs from 1.24 up to the 1.27 handle. With the current state of things in the European Union, it is difficult to think that the Euro will continue to climb and breakout above this area. Granted, anything's possible but it seems highly unlikely.
It really won't take too much to push this pair lower, on the right headline would send it straight back down and as such I am very cautious when it comes to buying the Euro. In fact, it looks horrible against several other currencies as well, and the one thing that keeps pushing this higher will more than likely be the anticipation by traders of possible monetary easing by the Federal Reserve.
This is expected to be done in September, and anything that disappoints will send this pair straight back down. Looking forward, I am still looking for some type of bearish action to sell this pair from, be it a week candle like we saw on Tuesday, or a break below the uptrend line.