The EUR/USD pair initially fell during the course of the day on Friday, even managing to break down below the 1.35 handle. Because of that, the buyers stepped in as the area has been massively supportive in the past. The resulting candle courses a hammer which of course in and of itself is a very supportive sign. With that being the case, I am willing to buy a break of the top of this hammer as I believe the market could easily go back to the 1.3650 region. After all, it is the “inner consolidation” of the larger consolidation area that we have been in.
On top of that, this is a market that is trying to figure out was going on between two currencies that essentially are plagued by central banks that wish to keep monetary policy loose. This loose policy will of course depreciate the value both currencies from time to time, and this is essentially an argument between two banks that are trying desperately to “race to the bottom.”
Short-term trading only.
In my opinion, this is a market that is short-term trading only. There is no real discernible long-term opportunities that I see in this marketplace, so that being the case I will continue to be quick to take profits. Ultimately, you can expect this market to go higher, possibly breaking out to the 1.40 level. However, I don’t think that this market has the strength to break out above the aforementioned 1.40 level, and as a result even if we did get up there, I would be looking to short this market on signs of resistance.
With all of that, I still think that you’re best off just going for “smash and grab” type of trades, and with that I believe that the summer range has set in, meaning that it will probably be a couple of months before we see anything that’s worth being more than a couple of days’ worth of action. However, the one thing that would change my mind about this pair is that we break down below the bottom of the hammer for Friday, as it could send this market crashing towards the 1.33 level.