The EUR/USD pair fell a bit at the open on Tuesday, but turned around to form a hammer candle. This suggests that we are going to try to break above the 1.20 level yet again, but I think that the market is starting to run out of momentum. There is a bit of a divergence between price and the MACD indicator, so I think that we may hang about this area, if not pull back. Without a doubt, the easiest trade for me is to buy the market on a break above the top of the shooting star from Friday. However, I think we may struggle a bit so I’m willing to sit on the sidelines until that happens, or we get some type a significant pullback that I can buy based upon value, perhaps back to the 1.1750 region.
The British pound exploded through the 1.3250 barrier during the day on Tuesday, suggesting that we are going to continue to see bullish pressure. I think short-term pullbacks will be buying opportunities, at least for the time being. The next target that I would have for this pair is the 1.3450 level, and then eventually the 1.35 handle. I see a significant amount of resistance at the 1.35 handle though, so it’s probably going to be difficult to break above it. I think that given enough time, the market may try to clear that area but on the longer-term charts there is a massive gap that I think will keep a bit of a ceiling in the market. In the meantime, I think buying is the only thing that you can do as we are certainly seeing a significant break out in the market. Volatility continues, but certainly the buyers are in control.