The EUR/USD pair rallied during the majority the session on Thursday, but found the 1.36 level to be a bit resistive, and pull back from the highs in order to form a fairly nice-looking shooting star. This shooting star tells me that the market is probably going to pull back from here, but I do not anticipate that we are going to see any massive selloff. Quite the contrary, I believe that any pullback at this level will more than likely be a continuation of the relatively tight market that we have been in for a couple of weeks.
I believe that breaking the top of the shooting star is a strong sign, but I don’t think that we will be a break above the 1.37 level, at least not anytime soon. With that, I look at this is a market that’s going to be difficult to trade, and I still believe that roughly 20 pips or so is about what you can count on anytime you put a trade in the marketplace. Because of this, I really don’t have an interest in trading this particular market at the moment.
It doesn’t mean that this market is useless though.
I like using this chart is a bit of a barometer on Euro strength or weakness. This is because the pair is the largest financial instrument and the world, so it really tracks the relative strength of the Euro and the US dollar fairly well. With that, a lot of times I will notice with this pair is doing, and trade the Euro based upon that. If the Euro is fading a bit, I will go look at other markets and trying to sell the Euro against stronger currencies. One excellent example right now is the EUR/GBP pair, which has been very bearish.
On the other hand, if the Euro is going fairly well against the US dollar, I would go ahead and buy the Euro against other pairs. It’s because this particular market is so congested that keeps me away from trading at with any sizable position.
