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Forex pairs in this Article » EUR/USD

The EUR/USD pair rose during the session on Thursday, breaking above the top of the shooting star that we saw printed on Wednesday. I think this is a very strong sign, but quite frankly there are quite a few hurdles above in order for the Euro to continue to go higher.

The first thing I see that the market has to get over is the 1.33 handle. The only reason I find that area interesting is that the fact that the downtrend line from the weekly chart meets up with roughly that area. There is a descending triangle that has been forming for some time, and as a result I think there is downside pressure just above that could drive this market as low as the 1.28 level. If we managed to break below there, we could see the bottom of the market fall apart.

EUR/USD Daily Chart July 26

Watch the Federal Reserve

This will come down to whether or not the Federal Reserve decides to taper off of quantitative easing in September. I don't know what to expect, quite frankly I don't think the Federal Reserve knows what it wants to do. That being the case, expect plenty of jitters between here and there, until at least the Federal Reserve comes out and actually states what it wants to do.

Expect a lot of choppiness between now and September's meeting, and as a result it will be very interesting to see what the trading community at large decides to do. After all, much of trading is based upon expectations, and quite frankly I'm not real sure how you can have any type of expectations at this point. Because of that, I intend to be very careful and keep stop losses relatively tight as the slightest chance that the Federal Reserve is going one way or the other can move the market drastically. On top of that, these hints will be reversed from time to time, and general chaos should ensue until we figure out exactly what we’re going to do going forward.

However, I believe that the resistive candle above this area would be an excellent selling opportunity. On the other hand, if we do get a daily close above that downtrend line, I would be interested in buying at that point as we would be broken out.

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