The Euro has rallied rather significantly during the course of the trading week, reaching towards the 1.1450 level. Having said that, we have not broken above the psychologically important 1.15 handle, so at this point in time we could get a little bit of a pullback. Pullbacks will more than likely end up being a buying opportunity due to the fact that it has been so explosive to the upside. Because of this, the market is more than likely going to continue to see plenty of momentum building, but we may have to wipe out some of those US dollar longs first.
Keep in mind that the market still has a lot of selling pressure above, but with a candlestick like this, there is almost always some type of follow-through. If we break above the top of the candlestick, then it is likely that we break above the 1.15 handle, perhaps reaching towards 1.16 level. However, we do pull back I think somewhere around the 1.1350 level could be a buying opportunity. Needless to say, the attitude has changed in this market due to the ECB, but the question now will be whether or not people start paying attention to the fact that the ECB was talk about tightening a year from now, and that the Federal Reserve is going to do it quickly? It is as if the market does not believe that the Fed is going to be able to as many hikes and as rapidly as they thought. Pay attention to the bond markets, they could lead the way as well.
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This article was originally posted on FX Empire