The EUR/USD pair initially fell during the session on Monday, as we continue to see softness in this particular currency pair. However, we bounced off of the 1.10 level and ended up forming a rather supportive looking candle. You have to keep in mind that the uptrend line from the ascending triangle on the longer-term charts also crossed the 1.10 level, and with that it’s probably going to mean that the buyers were very well aware of potential support. Quite frankly, if you waited for this type of supportive level, you have been very patient, but at the end of the day it means that the market should have to make some type of serious decision in this area. I believe that the uptrend line is essentially what needs to hold in order to keep any hope of a longer-term uptrend alive.
A story of two central banks
Looking at this marketplace, you can discern that a lot of the confusion is based upon the central banks involved. On one hand, you have the Federal Reserve which recently suggested that it could not raise interest rates anytime soon. The market had been banking on some type of interest-rate hike out of the United States, and when it did not get it, it appears that the Euro was the major beneficiary. The pair rose fairly drastically over the last couple of months, but continues to find the 1.15 level as massively resistive. In fact, that is the top of the ascending triangle that I have been watching.
On the other hand though, last week we have the European Central Bank telling the world that it was prepared to do more stimulus if needed. With that being the case, it is going to cause quite a bit of volatility and confusion, and with that it means that this pair will probably struggle to find any clarity. In the meantime though, it does look like we are going to bounce from an overreaction, and a break above the top of the hammer should have this market looking for roughly 1.12 over the next several sessions.
