The EUR/USD pair gapped lower initially during the trading session on Tuesday, reaching down towards the 1.18 handle. That’s an area that has been important in the past, and it now looks as if we will try to bounce from there. I believe that we will probably rally from here, looking to fill the gap from 2 days ago. Alternately, if we break down below the 1.18 level, then the market could go drifting a bit lower, perhaps reaching down to the 1.17 level after that. The market should continue to be choppy, but I think that the recent surge higher should continue to attract money from the longer-term aspect. Given enough time, I believe that the market is reaching towards the 1.21 level. Alternately, if we were to break down below the 1.17 level, that would be very negative, and would have me rethinking the entire scenario.
The British pound fell during most of the session, but later during American trading, we bounced enough to form a massive hammer. The hammer sits just below the 1.35 handle, so break above that level would be very bullish, and could send this pair looking towards the 1.3650 level above which has been the highs recently. Pullbacks should be buying opportunities, and at this point I think that the 1.3333 level is now the short-term “floor” in the uptrend. If we were to break down below there, the uptrend line should offer the floor going forward, but right now it looks to me as if the British pound should continue to go higher, although it is going to be very choppy, I still believe in the upward pressure that we have seen as of late. Once we break above the 1.3650 level, then we go much higher in a buy-and-hold scenario.