EUR/USD
The EUR/USD pair had a rough day as we ended up falling low enough to touch the 1.08 handle, and more importantly fill the gap from the Monday open. Now I think it’s only a matter of time before buyers get involved, and I recognize that there is a significant amount of support at the 1.0750 level underneath. Any type of bounce from that area could be a nice buying opportunity but I would wait for a daily confirmation in order to start putting money to work. I still think that the EUR goes higher, but short-term it looks as if we may need to pull back in order to build up a bit of momentum. That momentum should be a reasonably strong.
GBP/USD
The British pound initially tried to rally but broke down significantly below the 1.25 handle, which was a very bearish sign. I still think there is a significant amount of support near the 1.24 handle underneath, so I’m not interested in shorting. I believe that given enough time the buyers will return, as we have seen quite a bit of bullish pressure as of late. The British economy has been posting inflationary numbers, so that tends to favor the currency overall. Eventually the fundamentals will come back into play, but right now looks like this is more of a technical pullback than anything else. We did see US dollar strength late in the day, so it makes sense that the British pound would have paused.
Currently I believe there’s an argument to be made for waiting for the value to reassert itself in the market so we can take advantage of it. I believe that the buyers will come back into play as there is a lot of value to be offered at these low levels.
