The EUR/USD pair initially fell on Friday, but found enough support near the 1.09 level in order to bounce significantly and form a nice-looking hammer. The hammer sits just below the 1.10 level, so it does look like we are pressing up against a significant resistance barrier. Ultimately, we think that if we can break above there the market should continue to go higher, as the next major resistance barrier is close to the 1.12 handle, but there is only a noise between here and there to make this a fairly choppy proposition.

Even if we pullback from here, we think that is more than enough support near the 1.08 handle, meaning that we are buyers on supportive candles lower as well. We don't necessarily want to sell this pair, but if we broke down below the 1.08 level, that would be extraordinarily bearish as the market would make a “lower low.”

Relief rally

At this moment in time, I recognize that this is what could be classified as a “relief rally.” With this being the case, I think that a lot of the upward pressure has something to do with the Greek debt situation being put under control. That being the case, a market move to the upside makes sense. However, we are in the dead of summer so therefore I'm not looking for massive trend changing moves at the moment. I think that if we get above the 1.15 level in the future though, that could be a trend change. In the meantime, expect a lot of volatility and will be trading off of short-term charts.

We probably have about one more month of this kind of noise in the markets before real liquidity comes back. Once it does, we would fully anticipate this market moving in one direction or the other. At this moment in time, it looks as if the market will more than likely favor the upside based upon longer-term charts though.