EUR/USD had a fairly quiet session on Monday as the markets simply have no real catalyst to push them in either direction. However, I do have to admit that the action looks relatively supportive at this point in time. The 1.23 level is an area that looks like it wants to be supportive at this point, and although I am very bearish on the Euro in general, I have to admit this area is an issue for sellers.
The pair is currently in what I see as a rising wedge, and this is of course a bearish pattern. This suggests to me that the market is building up a crescendo that will turn bearish in the end. The summer volumes are thin, and we are only a couple of weeks from having the larger traders stepping into the markets to move them in the direction that the “big players” want to see it go.
1.25, or so
The 1.25 level represents a massive amount of resistance to me. In fact, I suspect this market may be able to drift to that area, but will find it to be far too strong to get above it for any real length of time. The reason I say “or so” is that I see a lot of noise until we get to the 1.27 level, and as a result there is a high probability of the pair rising to the resistance area before falling.
The economic issues in the European Union are nowhere near being resolved, and as a result I think it is only a matter of time before the Europeans are punished again. However, there are a few meetings coming up for the ECB that could be massive in their implications, and as a result an easing monetary policy should also work against the value of the Euro.
On a break of the bottom of the rising wedge, I am going to aggressively short this pair. It would represent both a break of the support line, and the 1.23 level. I will also short the EUR/USD pair on signs of weakness after a rally, and become even more interested as we approach the above mentioned 1.25 level.