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Forex pairs in this Article » EUR/USD

The EUR/USD pair fell initially during the session on Tuesday, but as you can see bounced yet again in order to form a little bit of a hammer for the day. This formed right around the 1.32 level, an area that suggests that there is going to be more bullishness ahead. However, you can see that I have clearly marked a red downtrend line on the chart from the weekly timeframe. This downtrend line seems to coincide with the 1.33 handle, so I feel that the shorter-term trader has a bit of a nice trade setting up, while the longer-term trader will be waiting out there to take the market from them.

When you look at the longer-term charts, there is a definite ascending triangle, and because of that I feel that the easier trades are to simply wait for weakness on this rally. The closer to this downtrend line from the weekly chart, the better I feel about shorting this market.

EUR/USD Daily Chart July 24

We could possibly breakout though

It is possible that we will close above that weekly downtrend line, and at that point time I would give up any thoughts about shorting the Euro. This will more than likely have something to do with what the Federal Reserve does, and whether or not they taper off of quantitative easing. If they do not, expect the Euro to skyrocket in value against the US dollar, as the greenback would be devalued.

However, I do fully expect to see resistance come into play up here, and as a result I will be shorting on the first signs of weakness. Interestingly enough, if we continue down from there, the market could possibly head back towards the 1.28 handle, a nice move waiting to happen. If we went below there, the market really could fall apart, and perhaps head for the 1.25 handle first, and then the 1.22 handle. That of course is projecting out into the future, so not necessarily something you can act on at the moment, but it does in fact give you something to think about for the future.

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