The EUR/USD pair fell during most of the session on Monday, but bounced enough to form a hammer-like candle at the 1.29 handle. This action suggests to me that there is going to be a bit of fight in the bullish camp, and that a pullback while looking possible – will be somewhat short lived at this point.
I see the pair as one that is far too erratic to be comfortable trading for anything resembling a long-term trade, and as such am fairly quick to take profits at this point. The 1.2750 level should bring in more buyers if we get that low, and a run towards the 1.33 level looks possible if we can get back over the 1.30 handle.
The market has been one that has been essentially trying to figure out which side of the Atlantic that it wants to focus on at the moment, and moves accordingly. In other words, whoever seems ugliest at the moment. Currently, it looks as if the easing by the Federal Reserve is what people are paying attention to, and therefore the Euro has risen. But as sure as the sun will rise tomorrow, there will come a time when the markets fixate on the European Union again. This has been the pattern for over two years now, and there is nothing out there to suggest that this is going to change now.
Consolidation?
Looking at the charts from a purely technical point of view, the odds favor a bit of a bounce, but as I see it – there is a lot of noise between here and 1.33 for the buyers to chew through. Because of this, I think the pair will continue to be a mess, and although we have seen a massive rally over the last few months – there is only so far we can go before the levels reach absurdity. If I had to trade this pair – and I don’t – I would suggest the likely move will be a consolidation move between 1.29 and 1.32 or so. If you have the ability to play the pair via the options market, this may be a great alternative as you can sell premium outside of the range to make a bit now.
