Last Tuesday, our analysis ended with the following:
1. Bullish bias but uncertain
2. Breakout of 1.3450 could see a move up to 1.3500
3. Short trades off reversals from the 1.3400 – 1.3450 zone
4. Long trades off reversals from any pull back to 1.3227 and 1.3104
The course of events since then was dominated by the Fed's announcement last Wednesday evening that tapering would not be commencing. This had the effect of an immediate and sharp weakening of the USD against the EUR. It is always important to remember the limitations of technical analysis, and the major limitation of course is that dramatic news and changes in market sentiments can easily make our calculations at least temporarily irrelevant, as we can see from the daily chart below:
The price quickly, easily and immediately broke through even the very strong resistance at 1.3500 and has remained up there ever since, in fact the pair has done very little since the Fed's announcement. Technically, the bullishness has been maintained. We have not had any kind of pullback to any support levels, let alone the ones mentioned last week.
Looking to the future, let’s start by examining the weekly chart
Following the bullish reversal of two weeks previously, we had another bullish week, with the weekly candle closing not far off its high. There is a major resistance level overhead at 1.3700 which should start making its effects felt from approximately 1.3600.
The former resistance below us at 1.3450 may by now have turned into support.
Let’s get some more detail by taking another look at the daily chart
All this really adds is to emphasise the resistance from 1.3600 to 1.3700, this is a major peak going all the way back to 2011 since it was last breached.
Overall, bias should remain bullish for the time being. The action has been very dull since the Fed's announcement so we need to a see a pick-up in volatility before a trade will become tempting. The pair has hardly moved since then, putting in total ranges of less than 60 pips over 24 hours on Thursday, and then again on Friday. A pull-back to 1.3450 could be a good area for a long. If we reach the 1.3600 to 1.3700 area, this is likely to provide an excellent opportunity for a short trade, despite the bullish bias.