The EUR/USD pair had a relatively quiet session on Monday, as traders came back to more liquid markets after the US Thanksgiving holiday the previous week. The market fell somewhat, but found enough support at the 1.2950 level that it now looks like the Euro is very comfortable 1.30 on the whole.
This candle is shaped like a hammer, and as such looks like 1.30 will be offered as for going forward. However, if we break the bottom of the hammer, it suggests a "hanging man" formation, which is very bearish. I personally don't like the Euro as most of you know, but have to admit that the ferocity of the ascension has been quite impressive. Looking at the charts, I see that the 1.3150 is significant resistance, and I do think that the market is going to try to get there.
Ironically, one of the things that could derail the Euro rally would be a failure of the Americans to come together for the “fiscal cliff” discussions. In a twist of logic, traders would find themselves running to the safety of the US dollar even as the US economy would be getting pummeled.
"No man's land"
For myself, I am not interested in going long or short of this market at this point in time as we are roughly halfway between the top and bottom of this consolidation area. If I had to pick it direction, I would be much more interested in shorting this market as we rose closer to the 1.31 handle. Up in that general vicinity, we should see quite a bit of resistance step into the marketplace, and as a result should produce a decent selling opportunity.
However, if the United States Congress can come together in solve the fiscal issues in front of it, we could see a massive "risk on rally", which should send this pair slicing through the 1.3150 level without much difficulty. In a roundabout sense, the future this pair is in the hands of the U.S. Congress as much as anything else. With this being the case, I expect the volatility to continue.