The EUR/USD pair fell during the course of the day on Wednesday as the GDP numbers came a much stronger than anticipated in the United States. On top of that, the FMOC released a statement suggesting that although quantitative easing is been tapered yet again, the reality is that the market still shows a lot of slack in it, as employment seems a bit depressed. This drove the value of the US dollar higher, and then we had a turnaround later in the day.
The resulting candle is a hammer, which of course is one of the more supportive and bullish candles and you will see. The fact that it appeared at the 1.34 level adds more credence to the “round number theory”, as big money could come back into play. Quite frankly though, I feel that with nonfarm payroll coming out tomorrow, this could simply be a bit of a “dead cat bounce.”
Looking to sell rallies.
I personally am looking to sell rallies in this pair, and think that the 1.35 level is going to be massively resistant. To be honest, I would be really surprised to see this market even challenge that level before the jobs numbers come out of the US. With that being the case, I feel that this is one of those times where a lot of gullible traders will probably come in and try to scalp the market, only to lose money. I know this, because when I was a new trader, I would’ve looked at this as a nice trading opportunity as opposed to a time to step back and let the market come to levels that I find value in.
Ultimately, I think that we still go down to the real support at the 1.33 handle, although a bounce between here and there certainly is expected. This should have sellers stepping in and taking a value play by a cheaper US dollar, recognizing that the longer-term trend certainly seems negative as we are fallen so swiftly from the month of May.