The EUR/USD gapped a bit higher at the open on Monday, but then spent the rest of the day pulling back. In the end though, we got a bounce, and a hammer has formed as a result. This of course is a strong sign, and I think the bulls will step in and take over yet again, as we target the 1.36 handle. The pair is decidedly bullish overall, so I am not a fan of shorting this market, no matter how short the time of the trade is.
The Euro is strong overall lately, and as a result I think this is a pattern that will continue throughout the rest of the year as we so almost no chance of the Federal Reserve doing anything to strengthen the Dollar. The Euro is essentially the “anti-Dollar”, so expect a lot of people to express their opinions here.
The ECB and Fed
The central banks are on opposite ends of the playing field, as the European Union has just exited a recession, and the Federal Reserve focuses on the weak jobs situation in America. The unemployment rate in the United States only seems to fall when it takes into account the people leaving the workforce, and therefore the diving percentages are a farce, something traders are starting to focus on more and more.
The interest rate differential isn’t going in favor of the Americans lately, and this of course has more money flowing into Brussels, Frankfort, and Paris, as opposed to New York. The market will continue to favor Europe, and therefore the pair will move higher in favor of Europe.
The 1.40 level is where I think this market will be at in the next couple of months, and because of this I believe that every time this pair falls, it will end up being a buying opportunity as more and more money has been flowing in the European indices such as the DAX, CAC, IBEX, and MIB. The core has been doing well for a while now, but peripheral Europe is gaining more and more traction.
