EUR/USD
The EUR/USD pair fell initially during the trading session on Tuesday, but bounced enough to form a hammer. The hammer is sitting at the top of an extended move, so we are either going to see the market explode to the upside, or form a bit of a “hanging man.” Hanging man is formed like a hammer, but is when the market roles over interest to the bottom of the candle. If it does, that’s typically a very negative sign. Regardless, even if we break down from here I believe that the market will find plenty of buyers underneath, so any selling opportunity will be short-term at best. I think the 1.21 level underneath is going to be the beginning of significant support, so on a breakdown I would be looking to pick up value in that area. Longer-term, I anticipate that the market goes to the 1.25 handle.
GBP/USD
The British pound has gone back and forth during the course of the session on Tuesday, forming a hammer just as we had seen in the EUR/USD pair. I think that the market breaking out and above the top of the candle shows that they British pound explosive the upside. However, I think that if we break down below the bottom of the hammer, the so-called “hanging man” sends this market to the downside. I believe that the 1.3650 level underneath continues to be an area of significance, and it should be an area where we would find plenty of buyers. I still believe that the 1.40 level will be targeted over the next several weeks, as we most certainly have a very upward proclivity in this market, not only because of British pound had been oversold for so long, but there is a strong anti-US dollar bias.
