The EUR/USD pair fell rather hard during the session on Thursday, testing the 1.3550 level. This is the beginning of significant support down to the 1.35 handle as far as I can tell, and as a result I would expect to see some type of supportive action in this general vicinity as I do not think that this pair is ready to break out of the consolidation range that we’ve seen for some time. However, I’m not willing to put any money at risk until I see that supportive candle, and as a result I’m essentially on the sidelines for the session.
All things being equal though, a supportive candle just above the 1.35 level would be a great buy signal, and would have me aiming for the 1.37 level yet again. I think consolidation is going to be the way this market goes for a while, simply because there are so many moving pieces, and so much lack of clarity.
The Federal Reserve is only making the waters murkier.
The Federal Reserve is pretty much confirmed what everybody else’s thought: That they have no idea what they’re doing. After all, we have just seen them cut $10 billion worth of quantitative easing per month, but in the same breath suggested that employment dipping below the 6.5% rate that originally have them normalizing the economy isn’t enough to necessarily guarantee that move. In other words, they don’t like the house the bill for themselves, so they are necessarily going to stay in it. This essentially makes the markets even less sure of anything in particular, and as a result you can expect to see this particular pair chop around as the Europeans have their own problems.
If we get below the 1.35 level on a daily close, that would of course be a negative sign and I think the market would go to the 1.33 handle given enough time. On the other hand, if we break above the 1.37 level, I think we run to the 1.38 level and then start facing significant resistance all the way up to the 1.40 handle. In other words, I’m not interested in this pair for anything more than a very short-term move.
