The EUR/USD pair tried to rally during the session on Monday, using the 1.37 level as a springboard. This is an area that’s been pretty supportive, and as a result the Euro of course got a little bit of a bid during the day. With that being the case, we rose to the top of the recent range, essentially the top of the hammer that formed last week. With that, a move above the top of that hammer would in fact be a nice buying opportunity, as I feel the market would continue the consolidation that we’ve seen between the 1.37 level on the bottom, and the 1.39 level on the top. While there is the possibility of going all the way up to the 1.40 level, I am a bit leery of doing so as the European Central Bank has made it clear that the 1.40 level is a bit too rich for their liking.
Summer range?
It is possible that we have just formed the summer range. I do believe that at the very least, the 1.35 level should be the absolute “floor” in the market for the summer, as I do not see this market breaking down below those areas. With that being the case, the market could very well trade in either a 500 pip range between 1.35 and 1.40 during the summer months, or between the 1.37 level and the 1.40 level. Nonetheless, we are getting towards the slower months, and as a result sooner or later we will see the market called down. I’m not a big fan of the Euro in general, so I do think that ultimately it’s probably going to be safer to sell rallies as they appear, but I am cognizant of the fact that we are sitting on top of massive support right now.
That being said, if we break down below the bottom of the hammer from last week, it should be a fairly easy move down to the 1.35 handle as there is an awful lot in the way of support between those 2 areas. At that point time, I would not hesitate to sell and would in fact even take a little bit of a happier position in order to do a bit of a “smash and grab” type of position.
