The EUR/USD pair attempted to rally on Friday, but was beat back down as the pair broke above the 1.30 level. This looks as if the large amount of resistance above is going to continue to work against the buyers for the time being. However, there are plenty of people that would love to get involved in this pair to the buy side, and as such I don’t think any pull backs will be substantial at the moment.
In fact, I see the 1.2750 level as a potential area to attract more buyers going forward. After all, this rally has been avoided by a lot of people over the last few months, and as a result there are plenty of people wishing they could participate.
The Europeans are in a recession, but the Federal Reserve has announced that it is going to be easing for an “unlimited” amount of time, and because of this the Dollar has been beaten up against almost all currencies, and this of course includes the Euro. It’s kind of ironic, as the fact that the ECB hasn’t done much has been one of the catalysts to lower EUR/USD rates over the last few months. This is because now it is actually a catalyst for higher rates as the Federal Reserve has added to its easing policy, and the Europeans have essentially done nothing to hurt their own currency. (They will however.)
1.2750 should hold, and if it doesn’t…..
The 1.2750 level looks like a great place to buy. However, if that area doesn’t hold I would think that the momentum has shifted to the downside again. This pair has essentially been a question of which side of the Atlantic is under the microscope at the moment, and I think this is going to continue.
The 1.25 level should be supportive if we do fall that far. On the upside, I see the 1.33 level as being a crucial point for the buyers to clear on the upside if they would like to continue this rally. I also think this potential pullback that we are seeing at the moment is necessary as the pair has rallied so hard over the last couple of weeks.