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Forex pairs in this Article » EUR/USD
By: DailyForex.com

The EUR/USD pair had an absolutely phenomenal day during the session on Thursday, using the 1.3550 level as a launching pad. This area was the top of a larger support area, and therefore it’s not surprising to see this market bounce. However, I had mentioned that the 1.37 level would be resistive. To be honest, I’m quite surprised that this market made the move in just 24 hours! With that, it appears that the Euro is going to continue to strengthen for the time being.

The candle for the session on Thursday was so strong that there’s almost no doubt that the strength of the market is picking up, and therefore a break of the 1.37 level for me since this market going to the 1.38 handle with almost no doubts. It’s up there that I begin to see significant resistance again, probably going all the way to the 1.40 level. However, the fact that we had moved so high in such a short amount of time makes me wonder whether or not we can truly break above the 1.38 level, and perhaps go to the 1.40 level with this new found strength.

Is the threat of deflation weakening in the European Union?

There’s been some kind of threat of deflation lately in the European Union, and as a result the Euro would continue to weaken over the longer term as the possibility of the European Central Bank loosening monetary policy reared its head. On the other side of the Atlantic, people begin to wonder whether or not the Federal Reserve can taper off of quantitative easing which of course would be positive for the US dollar. In that particular scenario, with the Europeans worrying about deflation, and the Americans possibly tightening, this should be a one-way trade. However, with the European Union showing stronger than anticipated economic numbers during the session on Thursday, that puts a lot of this into question.

That being the case, I believe that at least in the short-term the Euro should continue to strengthen. Short-term traders will continue to buy every time this market dips, driving it to at least 1.38 over the next several sessions.

EURUSD Daily 12414

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