The EUR/USD pair fell during the bulk of the Friday session, but as you can see we bounced off of the 1.37 level, showing that there is in fact an underlying bid to this market. That being said, I think that this market could still drift a little lower, simply based upon the weekly chart, which of course formed a shooting star. However, I think that there is a significant amount of support at the 1.36 handle, and as a result I would be more than willing to buy any type of pullback that shows signs of support down to that area.
Looking at this chart, the fact that we did form a little bit of a hammer suggests that we are in fact going to go higher over the longer term. However, the 1.38 level has a bit of a "thick resistive area," to the 1.3850 level. Above there, this pair could get really interesting, and I think the 1.40 level would be almost assured at that point.
Jobs in America and the Federal Reserve.
As the Federal Reserve members have stated that their concern about quantitative easing being tapered off of is based upon the employment situation in the United States, and as a result economic numbers based around employment will have to be watched carefully. That is the one last hurdle that I see for the Federal Reserve and tapering. However, it's going to be a bit of a fight over the next several months, and expect a lot of noise when it comes to the value of the US dollar overall.
On the other side of the Atlantic, we have the European Union which is starting to worry about deflation. Deflation is one of the quickest ways to get a central bank to absolutely pummel its own currency, and quantitative easing could be coming to the ECB soon. With that being the case, I expect to see this market go higher in the short term as we are mainly focusing on America, but somewhere around 1.40, don't be surprised to see a nasty pullback. I have no plans on selling this pair anytime soon.
