Euro falls during the week only to find buyers against the dollar

The EUR/USD pair has pulled back significantly during the week but turned around to show a massive hammer at what I think is the very bottom of the safety zone for buyers. Now that we are form this hammer, if we can break above the top of it and clear the 1.21 handle, it’s likely that we will continue to go much higher. The bullish flag that formed on the weekly chart of course was a driving signal for me over the last several weeks, but we have had a significant pullback that has clouded the situation.

If we can break above the 1.21 handle, then I think we would be on track to go to the 1.32 level again, but when I look at the chart, it’s difficult to get overly excited until we break the 1.21 handle. I anticipate seeing a lot of noise in that area, so I think short-term you can find buyers, but the real battle will be at the 1.21 handle, so keep an eye on that. I think that if we break down below the bottom of the hammer for the week though, that should unwind this market and send the EUR/USD pair back down to the 1.15 handle.