The EUR/USD pair initially fell during the session on Thursday, but as you can see the 1.350 level offered enough support to push the market back up. We are starting to slam into a significant resistance area, and the fact that the last four sessions have been so parabolic will make me a bit uneasy about buying in this general vicinity. After all, the momentum is nice, but you have to question whether or not there is enough in the way of true conviction. Quite often, this is one of those time periods where people are basically just chasing the so-called “hot trade.”
A pullback from here would be very healthy, and I believe that the 1.38 level would offer a significant amount of support. In fact, that’s what I’m hoping to see so that I can get involved to the upside. Looking forward, I believe that the 1.40 level will be very significant from a longer-term perspective, as there is a downtrend line from the monthly chart that slices just below it. If we can get above there, the Euro suddenly becomes a buy-and-hold type of proposition.
Momentum must be built.
Now that we have this impulsive and parabolic move, we have to build overall momentum. Momentum is something that needs to be sustainable, as well as something that can last for a significant amount of time. With that, I believe that a pullback will attract more buyers who have missed this move. There will be a lot of them, because quite frankly this pair has been very choppy over the last several months, not to mention last several years. If we break above that 1.40 handle however, that breaks a massively bearish trend line that is extended all the way back to the beginning of the financial crisis. That would be a very significant turn of events in my opinion. We would be back to the old days of buying the Euro every time it pulls back, something that was very common six or seven years ago. That being the case, I hope that truly happens as it makes for a much easier trading environment.
