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Forex pairs in this Article » EUR/USD

The EUR/USD pair had a very benign day during the Friday session, suggesting that it is turning right into a little bit of resistance. I had anticipated that the 1.33 level would in fact be resistive, and so far that's what we've seen. If you look at this chart, there is a red downtrend line just above, and this is from the weekly timeframe. In fact, this downtrend line is the top of the descending triangle that has a base at the 1.28 level.

It is because of this descending triangle that I think this pair will run into serious trouble just above. I am not long of this market, but I have not been shorting it yet either. I am looking for a resistive candle in this general vicinity to start selling as I think the risk to reward ratio is absolutely fabulous. That being the case, it isn't until we close on the daily chart well above the weekly downtrend line that I would even consider buying this market. If that happens, that would of course show significant resistance being blown through. At that point time, I would expect the Euro to have "broken out", and probably go much, much higher.

EUR/USD Chart July 29

Watch the Federal Reserve

The Federal Reserve is currently mulling whether or not to taper off of quantitative easing, and as a result the markets are pricing it in and out depending on the latest headline. Right now, it appears that the market is expecting the Federal Reserve to keep the same amount of quantitative easing going forward, but any mention of tapering off should send the value of the US dollar much higher. If that's the case, expect this pair to break down at that point and probably head back down towards the 1.28 handle.

If we somehow get below the 1.28 level, I suspect that we would hit 1.22 before it's all said and done. I do not however believe that that will happen unless the Federal Reserve tapers off of quantitative easing over the course of the next couple of months. In the meantime, expect a lot of back-and-forth jerky action.

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