The EUR/USD pair fell during most of the session on Monday, but found enough support at the 1.33 handle in order to attract buyers. What's most interesting about this chart right now is the fact that we have formed four consecutive hammers in a row based upon this support level. Because of this, I do believe that the 1.33 level will continue to offer significant support. However, if you look at the weekly chart, you can make a strong case for a downtrend line that is situated at roughly the 1.34 handle right now. If we can get above that trend line, I think that this market will suddenly become very explosive to the upside.
For myself, I believe that the catalyst for this market to breakout to higher levels like that will be based upon the Federal Reserve Chairman and the words that he speaks after the FMOC meeting later this week. If there is no mention of quantitative easing slowing down, there is a likelihood that the markets will price in "QE forever" as they did previously, and the US dollar could get absolutely thought. If that's the case, this market will certainly go higher.
Watch the trend line
Without a doubt, the two most important levels on this chart for me are the 1.33 handle for support, and the downtrend line as resistance. Until one of those areas gets broken through, I won't be trading this market. I also suspect that it won't happen until Chairman Bernanke speaks on Wednesday. Remember, there is the FMOC Statement, FMOC Economic Projections, and the FMOC Press Conference. It is the press conference that will be the most important out of the three in my opinion. This is because there will be a question and answer period that Mr. Bernanke will be facing.
Any mention of expanding quantitative easing will absolutely crush the dollar. While I don't expect to hear that, if he doesn't mention any more tapering, there is a possibility that people will calm down when it comes to worried about that particular possibility.