The EUR/USD pair initially fell during the course of the session on Monday, but as we have seen several times now, the 1.35 region brings and quite a few buyers. Because of this, I believe that we are essentially going to be stuck in this general vicinity, and quite frankly I feel that the easiest trade is to simply buy the Euro every time we get fairly close to the 1.35 handle. I know it’s kind of lazy thinking, but I cannot help but suspect that we are going to be stuck in a range for some time.
Ultimately, I also believe that the 1.37 level is going to be too strong. Because of this, I assume that the pair is going to consolidate going forward, and this makes quite a bit of sense as we serve to head into the summer months. After all, the summer tends to be rather quiet and with that we should see a nice range settled into.
Central banks are not helping the situation.
While central banks love price stability, the truth is that they are killing the volatility in this pair. At best, we have sudden moves for a day or 2, and then simply grind sideways in a very choppy manner. I don’t see anything on this chart is going to change that, and as a result I would be very suspicious of any move lasting for more than a day or possibly two. Going forward, if we do break down below the 1.35 handle, that would be significantly bearish and the market would probably head to the 1.33 handle given enough time. On the other hand, if we managed to break above the 1.3750 area, at that point in time it wouldn’t surprise me at all to see the market head to the 1.3950 level, where it would meet quite a bit of resistance in that general vicinity. However, I think we are essentially going to grind sideways overall, making this a short-term traders market only and impossible to trade for anything longer than that.
