The EUR/USD pair initially fell during the session on Tuesday, going as low as the 1.3750 area. This area caused the market to bounce, and in the end formed a nice-looking hammer. This hammer of course suggests that the markets going to go higher, but I do have concerns above as there is plenty of noise that could in fact make buying almost impossible. In fact, I am now very hesitant to be involved in this market to the upside until we clear the 1.40 level.
The reason I say that is that the longer-term charts feature a downtrend line from the beginning of the financial crisis that slices through this pair at roughly 1.3950 or so. That way, if we get above the 1.40 level, we now have not only broken above the downtrend line, binds the large, round, psychologically significant number as well. In other words, you have at least two reasons to start going long.
Hammers matter, but so does the large amount of noise above.
Hammers of course matter, and they are one of my favorite trading signals. However, this particular pair has a ton of noise above, so I quite frankly think that buying it is going to be a bit difficult, although I certainly can make the argument that we should go higher. With that, anytime I feel that there is enough confusion in a market, its better just too simply stay away. Staying away from a market that doesn’t know where it wants to go has saved me an absolute fortune over the years, and this pair to simply have that “feel” at this moment.
That being said, I think that we are going to chop around in this general vicinity, and as that is the case, is going to be difficult to make any serious profits in this market. More than likely, your best bet is going to be dealing with the 15 minute chart, as we should continue to see massive volatility in a pair that seems to have trouble making up its mind for any real length of time.
