The EUR/USD pair had a fairly negative session on Monday as traders came back from the weekend. It seems that we continue to struggle out the 1.14 level, which of course is a not a huge surprise to me, because we are testing the last vestiges of true resistance. I believe that this resistance and that the 1.15 level, and we are essentially the middle of forming a huge “W pattern” in this market which of course is one of the most bullish reversal signals that you can get.
With this, I believe that this pullback is simply going to be an opportunity to buy value in a market that without a doubt seems to be changing its attitude. At this point in time, I think we are simply trying to find more buyers to push things higher and perhaps finally get the momentum to break out. A lot of this comes down to the fact that the European Union isn’t going to break up anytime soon, even though we were pricing something disastrous into the marketplace. In fact, I have to admit that I was recently calling for parity. That now seems like a very long shot. I think that the 1.05 level is as low as we are going.
Expected volatility
I do think that we will see quite a bit of volatility in this market, as the US dollar will be favored every time there’s a pickup in the markets, or some type of worrisome headline. However, it appears that the market is starting to pay more attention to the fact that the Federal Reserve isn’t likely to raise rates anytime soon than any type of issue coming out of Athens. Even though the Greek situation continues, it does appear that they are willing to give in a little bit in the latest standoff. Don’t worry, we will get more Greek drama later, but at this point in time it seems like we are focusing on Washington DC more than Athens. With that, I expect any rally and I look for supportive candles just below in order to start buying, or a break out above the 1.15 level. Don’t really have a scenario in which I sell this market as long as we can stay above the 1.10 level.
