The EUR/USD pair fell initially during the session on Tuesday, but as you can see yet again we have found that the 1.33 region has offered enough support in order to show the area to be an area of interest for the buyers yet again. In fact, we seen this happen at the last five days in a row, as the Euro sold off, people were willing to step in and start buying.
What I find most interesting around this region is that there is a downtrend line from the weekly chart just above. I think that if we can get above the 1.34 handle, that will show significant strength, and as a result we could see this market take off at that point. Quite frankly, I think that if the downtrend weekly line gets broken, this market will show an extraordinarily high amounts rate going forward.
Nonetheless, we have to wait until after the FMOC meeting happens in order to get significant input from the Federal Reserve, as it is expected that in the question and answer period that there should be mentioned of the "tapering" that has rattled the markets recently. If the quantitative easing language continues to mention the idea of "tapering", I believe that the US dollar will strengthen at that point. If that happens, a move below the 1.33 level will signify that we are heading back down towards the previous consolidation area and that will start shorting this market. On the other hand, if the Federal Reserve suggest that quantitative easing is in no danger, expect the US dollar to continue to weaken, and the Euro to be one of the major beneficiaries.
Watch for headlines out of Europe
The European Union still has plenty of issues. In fact, some of the peripheral countries are starting to see their bond yields blowout again. If that happens too quickly, expect the Euro to melt down again. While I don't expect that to happen right away, it is a possibility sometime this summer. That being the case, we suddenly have to keep her eyes open for headlines coming out of that region the world, but right now the threat doesn't seem imminent.