By: DailyForex.com
The EUR/USD pair continued to confound sellers on Wednesday as the pair fell, but got a bit of a boost in later hours in order to form a hammer. This pair has been rather buoyant for a while now, and although I think ultimately the situation in Europe gets worse before it gets better, this pair looks dead set on going higher.
There are a multitude of reasons to sell this pair. The most important one isn’t among those reasons though. The most important one is obviously price. This pair has been a perfect example of why it is necessary to trade the markets as they are, not as they “should” be.
The 1.2850 level
The 1.2850 level looks as if it is trying to act as support at the moment, even though it was one hundred pips above where I suspected support should have come into play. The fact that the daily candle closed as a hammer certainly will have gotten the attention of many traders, and I suspect that the Spanish budget announcement today should be the catalyst for the move higher.
The 1.30 level is the start of a 300 pip zone of resistance, and as a result I think the upside will be fairly choppy. The ride higher will certainly have days where the pair pulls back, but as long as we are above the 1.2750 level – I don’t see an easy way to sell the Euro in this market.
However, this market can be used as a technical indicator for other pairs. For example, the EUR/JPY pair is very interesting at the moment. It has formed a hammer right on the 100 level. If the value of the EUR/JPY starts to rise, then by extension the EUR/USD should as well. Or more importantly – the other way around. The EUR/JPY seems to have a clearer path higher to the time being….
The EUR/GBP is much the same story. Because of this, I think the Euro is setting itself up for gains, but I think this market won’t necessarily be the easiest one to trade at the moment.