The EUR/USD pair has been negative during much of the trading session on Monday but turned around to rally and form a hammer. The hammer is sitting at the 50-day EMA, suggesting that we are seeing longer-term money come back into the marketplace. If we can clear the 1.2350 level, the market should continue to go higher, perhaps reaching towards the 1.25 level above. This is a market that I think will continue to offer a lot of volatility, but in the end, I believe that the buyers are going back and forth and trying to build up the necessary momentum to break out. Once we do, and clear the 1.25 handle, I think that the market will then go to the 1.32 level after that, which has been my longer-term target based upon a breakout of a bullish flag on the weekly chart. I believe that the 1.21 level underneath is the “floor” in the uptrend.
The British pound initially fell during the trading session on Monday, but then found enough buyers to turn around and rallied a bit. We are sitting just below the 50-day EMA, which could be dynamic resistance as it has been dynamic support. I think that the market will continue to find buyers on dips, and I believe that the 1.3650 level underneath will continue to be massive support. When looking at the Thursday hammer, I think that could be a sign that the buyers are starting to come back as well. However, there is plenty of noise between here and the 1.40 level, so it’s likely that we will be very choppy over the next several sessions. Unless you are willing to hang onto a trade for a certain amount of time, I suspect that it’s going to be difficult to trade the British pound as you will need to be patient.