The EUR/USD pair fell during the session on Wednesday, but remains well within the consolidation area that we have seen over the last week or so. Because of this, I don’t read too much into this chart right now, but recognize that the 1.37 level below should be rather supportive, that’s assuming of course we even get there. I believe that a supportive candle in this general vicinity is a buy signal, but only for short-term trader types. After all, there is a massive amount of resistance above, especially around the 1.3950 level as there is a downtrend line from the monthly time frame in that general vicinity. That downtrend line started at the financial crisis, and has been in play ever sense. With that in mind, it has to be relatively significant.
It is going to be difficult to be in this pair for anything more than a short-term scalp, but range bound traders will probably do fairly well. If you are more of a longer-term trader, this is a pair that probably not going to be very appealing at the moment due to the fact that there seems to be so many moving parts at one time.
Interest-rate differential.
The interest-rate differential of course still favors the Euro, but the fact that the Federal Reserve is starting to tighten its monetary policy of course is going to close that interest-rate differential a bit. Nonetheless, it’s likely that ECB and its decision to keep monetary policy where it is that probably spooked the market into buying the Euro recently. With that, we have to look at future interest-rate differential expectations, and the fact that the Federal Reserve has recently stated that it expects short-term interest rates to reach the 1% level by the end of 2015, this of course upsets the balance in this pair that we’ve seen for some time. With that, I believe that the US dollar will overall tend to do fairly well, but I see this as being a market that is essentially killing time, waiting for some type of clarity.
