The EUR/USD pair rose again on Friday as the Non-Farm Payroll numbers came out as expected. The lack of bad news allowed the bulls to come back out, and as a result the bullish behavior of this market continued. The pair has been on a tear lately, and there is absolutely nothing to suggest that the market is about to turn back around for anything substantial.
The 1.35 level being broken to the upside was a big deal in my estimation. The neckline of a massive inverted head and shoulders, this area should kick off the next leg higher in the pair, and I think the move will go as high as 1.4950 over the long run.
The European Central Bank has a meeting this coming week, and there is always the chance that they complain about the higher priced Euro, but in reality there is little they can do about it at the moment. The ECB already made the mistake of saying that the bank saw no reason to expand monetary policy at the moment, and as a result many traders looked at it as a “green light” to own the Euro.
America’s print press is bigger.
The Federal Reserve continues to expand its monetary policy, and essentially print money. The US dollar continues to lose value as a result, and this pair will be no different. However, nobody can print like the Fed, and as a result the Europeans will find it very difficult to fight the Americans and their never-ending supply of ink. In other words, it appears that the Europeans are going to “lose” the race to the bottom.
The market does look like it could pullback though, but I would see this pair being a “buy on the dips” market. The 1.35 level could provide a great entry point, or even a place to double down on the long trade. The pair may not fall that far though, so looking at the shorter-term charts might be the way to go. This allows the trader to get into this market, which could start to accelerate as traders realize what has just happened.