Euro traders had very little to do during the day on Monday, and I wasn’t bothered trading. Currently, this is a market that is simply waiting for some type of clarity out of both central banks that are involved in this currency pair. The European Central Bank is coming out with an interest rate decision and press conference on Thursday, and this of course will greatly influence where the Euro goes. On the other side of the equation, the Federal Reserve is likely to cut rates as well. This is a fight between a couple of lightweights.
Nowhere to be
The Euro is simply killing time against the US dollar as we await the results of the ECB meeting and press conference, but I think this is indicative of what we will see for the next several weeks. The market simply has nowhere to be, with the 1.12 level underneath as support and the 1.13 level above as resistance. Most large traders are away at holiday this time of year, and you are seeing the results of that. There isn’t a lot in the way of major players out there, and of course we have no idea where to go next as the central banks are “racing to the bottom” when it comes to interest rates and of course monetary policy.
Technical analysis
The technical analysis continues to show signs of sideways action, and as a result I think that you should be playing a range bound system more than anything else. The 1.12 level underneath is massive support, just as the 61.8% Fibonacci retracement level should be as well. To the upside, the 1.13 level is resistance not only because of the last couple of times we have tested it, but also the fact that we had formed a couple of inverted hammers a few weeks ago and shooting stars between now and then. Signs of exhaustion should be thought of as selling opportunities up there.
Ultimately, this is a market that looks likely to offer trading opportunities for short-term traders looking to go back and forth. I don’t know whether or not we break out yet, but if we do it’s likely that we will have a bit of a measured move, as the 100 PIP range should lead to a 100 PIP move. All things being equal, this is a market that is looking for direction, and doesn’t have a whole lot out there to determine it.
From a longer-term perspective though, it at least appears that we are trying to form some type of bottoming pattern. That doesn’t mean that we are ready to shoot to the upside, and quite frankly unless you will be investing, this is something that you can’t take too much to heart with. This is a market that I probably won’t be doing much trading in, but if you are a short-term scalper, this might be exactly where you want to be.
