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The EUR/USD pair fell originally during the Thursday session, but bounced in order to form a hammer centered around the 1.29 level again. This is the second day in a row we have seen this, and as such this is a very bullish sign for this particular market.
With the Spanish and Greece now apparently willing to pile on more austerity to get there bailouts, a little bit of a reprieve has come for the Euro. With this in mind, we think that perhaps a move above the highs for the Thursday session could see this pair attack the 1.30 level yet again. Above that level, we see the market being congested until we get to the 1.33 level. It is at that point time that the market would finally be free of all of the residual resistance, and the trend could continue much, much higher.
Going forward, we feel that there will be spikes in the value of the US dollar obviously. With the global risks that are out there, it is going to be difficult to hold onto this trade if you are going long of this market. With problems in the Middle East, Europe, and China we could see sessions where safety becomes king. When we get these types of moves, the Euro typically doesn't perform very well.
If we do pullback, there are a couple of supportive areas that we would consider looking for buy signals out as well. The 1.2750 level was the original area we were looking for support at, and to be honest the 1.29 level has been a bit of a surprise. Below the 1.2750 level, we see support at the 1.25 level as well. In fact, that area is extremely supportive.
If we break the bottom of the two hammers that we've formed over the last 40 hours, it would be a typical sell signal. However, at this point time we see the supportive area just below as being a bit worrisome if you want to be a seller. It appears that the market wants to go up on any mention of a solution in Europe, and as such we think that the next couple of sessions at least will be bullish.