The EUR/USD pair rose during the session on Friday, bouncing off the 1.36 handle as you can see. This is an area of course that is a large, round, psychologically significant number, but at the end of the day I don’t think it is major. Really, I believe it has more to do with the fact that we need to retest the 1.37 level for resistance now that the support has been broken. Because of this, I expect to see the sellers step back into this market somewhere near that level. I would not hesitate to start selling a resistive candle in the general vicinity.
Because the real support is down at the 1.35 level, I think that ultimately that is where the market will try to get to. However, there is a bit of an anomaly this week, as the European Central Bank has a meeting and will certainly move the markets when they announce any monetary policy. My suspicion is that the market will do very little between now and then, but I ultimately believe that the ECB will probably disappoint.
Disappointment equals a strong Euro.
I get the sneaking suspicion that the ECB will disappoint yet again. Yes, there have been overtures to the possibility of a negative interest rate, but at the end of the day the market already knows this. I believe that this may be one of the scenarios where the market will be happy with anything in particular, and as a result the Euro will probably continue to gain after the announcement. If you look at a particularly beaten up pair, the EUR/JPY, we have formed 2 hammers in a row on the weekly chart. I think this has to do with the fact that perhaps the Euro has fallen about as far as it can.
All things being equal, I wouldn’t be surprised to see a little bit of a move down but I think 1.35 is going to be a bit too supportive based upon longer-term charts. Quite frankly I think it would take something massive out of the ECB in order to pushes pair below that level. I will be looking for a reason to buy, but I don’t really have a quite yet. The later we get in the week though, the more likely I will find it.
