The EUR/USD pair initially fell during the session on Monday, but as you can see the 1.32 level did in fact offer enough support in order to bounce the market higher, as we closed near the 1.3250 handle. This market has recently broken out above 1.32, which of course was significant resistance and this of course makes the idea of it becoming support much more viable. I do believe that eventually we will see this market try to break above the 1.33 handle, and it is at that point in time that I become much more interested in going long of the Euro.
I can give you 1 million reasons not only anything European related, but it really comes down to whether or not the markets are focusing on Europe. Right now, it appears that they have completely forgotten that Europe is there, and therefore have completely ignored the debt crisis issues that still remained. It is because of this that I am a bit cautious about going long, and I do not expect a move above the 1.35 handle.
ECB could possibly cut rates
There's a lot of chatter out there in the Forex markets of the ECB could be getting ready to cut rates of the next couple of months. The ECB typically does not like the cut rates, and have been extraordinarily stubborn about it during this stretch of one financial crisis after another worldwide. Because of this, it is more than likely going to have a massive effect on the value of the currency if they were to cut the rates, simply because there will be somewhat of a surprise element to it no matter what happens.
With that being said, I firmly believe that this market will give us a little bit of an upside move from here, but we will eventually turn around and grinder way back to the 1.32 handle. Below there, and of course if we get a close below the lows of the session on Monday, I believe that selling down to the 1.30 handle is probably going to be the way to go.
