EUR/USD
The Euro rallied initially during trading on Tuesday but found the 1.16 level a bit too resistive to continue to go on higher. Because of this, I think that the market is in silly is trying to figure out what to do next. I think a pullback towards the 1.15 level would make sense as we have recently had a nice break out. We are within the consolidation area that the market had been so interested in previously, so having said that it’s likely that we are pulling back in order to find enough momentum to finally go back towards the top of that range. Keep in mind that the interest rates in the United States are climbing, and that of course will favor the US dollar overall. However, if we can get some type of resolution to the Italian debt crisis, that will send this market straight back towards the 1.17 level, perhaps even the 1.18 level.
GBP/USD
The British pound also tried to rally during the day but gave back quite a bit of the gains. This is a very negative sign, as the 1.3250 level continues to be far too expensive at the moment as headlines continue to throw the British pound around in multiple moves. I believe that the 1.3250 level will be very resistive above, so it’s very likely that we continue to see resistance and that area. However, if we were to get some type of major breakthrough and the Brexit negotiations, the British pound will probably slice through that area like it is even there. Otherwise, I think that the 1.31 level will be supported, and I also believe that the 1.30 level will be a bit of a “floor”, at least short term.
