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Forex pairs in this Article » EUR/USD

The EUR/USD pair tried to rally during the session on Wednesday, but as you can see the downtrend line that I have drawn previously from the weekly chart was just above, as was the 1.34 handle. Both of those offered enough resistance to keep the market from going higher, and then of course the last nail in the coffin was the comments coming out of the Federal Reserve during the session on Wednesday.

The FMOC minutes and question and answer session after the meeting suggested that the Federal Reserve could in fact begin tapering off of quantitative easing later this year. That being said, the market already anticipated that for the most part, the fact that the Federal Reserve Chairman suggested that the Federal Reserve could be out of the quantitative easing game by the middle of next year took the market completely off guard. That being the case, the bond yields shot straight up in the United States, and of course that always attracts money.

A tale of two central banks

In this particular pair we have a collection of two central banks that are at total opposite ends of the spectrum. You have the European Union which of course is heading towards a double dip recession at this point, and the United States which is doing quite well all things considered. That being the case, rates should continue to inch higher in the US, while the Euro is in serious danger of having a rate cut before anything else. Because of this, I think that we are setting up to see a weaker Euro going forward.

I've been wrong in this pair before, so I of course would be a little bit cautious. If we managed to break the bottom of the range for the Wednesday session, I believe that we will of course begin to fall from that area. After all, the Wednesday candle did smash through the lyrics from the last four or five sessions in a row. Also, we moved below the 1.33 handle, an area that is been obvious support. Going forward, I am not willing to buy this market until we clear that weekly trend line, or at least the 1.34 on a daily close.


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