The EUR/USD pair fell initially on Friday but found enough support near the 1.2250 level to turn around and rally significantly. At the close, we are reaching towards the 1.2325 region, and I think at this point we aren’t too far away from going higher. If we can break above the 1.2350 level, the market probably goes looking towards the 1.25 level over the longer term. For what it’s worth, the weekly chart has formed a nice-looking hammer, so I believe that the buyers are starting to come back into this market, getting rather aggressive. The uptrend line just below the 1.21 level should continue to lift the EUR in general. I have no interest in shorting until we break down below that level, something that doesn’t look likely to happen in the short term. I believe that the 1.25 level will probably take several attempts to break above.
The British pound went back and forth on Friday, breaking the top of a hammer from the Thursday session, which is a positive sign. However, the candle that formed it for the day is somewhat neutral, so I think we are going to see a bit of consolidation before we finally take off. Ultimately, I think that the market will go looking to the 1.40 level above, but there is the possibility that we need to grind for a while.
On a breakdown from here, I think the 1.3650 level offers the next support level, followed very closely by the uptrend line that I have on the chart as well. In other words, I believe this is a “longingly” market, but it may take some patience to get the results that we are looking for. If we break below the uptrend line, the market could go much lower.