EUR/USD
The EUR/USD pair tried to rally at the open on Monday, but then broke below the 1.21 handle. There is a significant amount of support underneath though, as this was a zone that had been so resistive in the past. If we were to break down below the 1.20 level, then I think this market unwinds, and the uptrend is all but over. I think we are waiting to see what happens next, and quite frankly I would step away from this market until we either get a bounce above the 1.2150 level, which would show signs of buyers coming in to pick up value, or a breakdown below the 1.20 level, which shows that we are falling apart, and the market should continue to go much lower. Interest rates in the United States continue to play a major role in where we go, so pay attention to those markets as well. In the short term, it’s probably best to see which way the market breaks and closes on a daily chart to start putting money to work.
GBP/USD
The British pound initially fell on Monday but found the uptrend line to be supportive. Just below the uptrend line is the 1.3650 level, and of course the 200-day exponential moving average that I have on the chart. By bouncing the way we have, and forming a hammer, I believe that we are ready to see buyers come back in. On a break above the 1.3 level I think that the markets will try to get to the 1.39 level, and then the 1.40 level after that. The alternate scenario of course is that we break down below the 200-day EMA, which could have this market looking for the 1.32 level. Overall though, I do think that the value hunters are coming back.
