The EUR/USD pair initially tried to rally during the course of the session on Monday, but as you can see pullback to form a bit of a shooting star. The shooting star at the bottom of the downtrend of course is a very negative sign. The 1.08 level is supportive, and if we can break below there, I feel that the market probably heads down to the 1.06 handle, and then the 1.05 handle given enough time. I don't really have any interest in buying this pair at the moment, but I do recognize that a break above the top of the shooting star would be a fairly bullish sign.

This of course would mean that the market could very easily head to the 1.09 handle, and perhaps even as high as 1.10 after that. I think that short-term traders might be a lot of buy on a break of the top of the shooting star, but quite frankly I feel that it is not until we get above the aforementioned 1.10 level that it is “safe” to start buying the Euro. Having said that though, Forex trading is rarely safe.

Choppy trading

I believe that the market will continue to chop around overall, and as we are in the middle of the summer, it's not surprising that now that we are away from the Greek debt crisis, it makes sense that the markets will simply go back and forth. Ultimately, I believe that the 1.05 level below is far too supportive to get broken to the downside. I believe that we will continue to bounce around between the 1.05 level on the bottom, and the 1.10 level on the top. However, if we get above the 1.10 level, I feel that the market will probably head to the 1.12 handle. Ultimately though, no matter what happens, the one thing you can count on is volatility at this point in time.