During the session on Wednesday, we had a rally in the EUR/USD pair, as comments came out that exiting quantitative easing relatively soon was “reasonable.” I believe that it’s only a matter time before this market continues to rally, based upon the technical analysis on the weekly chart.
The Euro fell last week but bounce significantly from a large support base at the 1.15 level. By turning around the way we have, it looks as if we at the very least are going to be looking for some type of rebound after a condition that was oversold. Ultimately, I think that the 1.15 level should continue to be massive in its support, so if we were to turn around and break down below there it would be catastrophic. However, it seems like the massive bounce that we have formed suggests that we have much higher to go. I believe that the 1.18 level is the next target, followed perhaps by the 1.20 level if we can continue to get calm out of Rome.
At this point, I think that we are starting to see a significant turnaround and pull back should offer buying opportunities as there is plenty of support at the 1.17 level underneath, and the 1.1650 level as well. I’m looking to buy short-term pullbacks with a small position, and then add every time the market breaks out to a fresh, new high. I believe that things will of course be volatile, because we have so much going on in the world. Italian bonds and banks of course make a huge factor when thinking about trading, so pay attention to that entire situation. If nothing else, I think this market sold off far too quickly for its own good, and it makes sense that the bounce was necessary at the very least.