Forex Commentary, EURUSD Bullish Setup 3-16-10

Daily Forex Market Commentary:

The U.S. dollar traded lower today after the U.S. Federal Reserve held benchmark interest rates near zero and reaffirmed its commitment to keeping them low for an extended period of time.

Concerns over the debt problems in Greece eased after Standard & Poor’s ended its review for a downgrade of Greece; they stated that the Greek government’s recent deficit reduction measures are supportive of the ratings.

The pound and euro both gained substantially on the greenback today, as did all the other major currencies. With the U.S. committed to maintaining low interest rates for the foreseeable future, it goes to reason that the U.S. dollar will continue to lose ground to the major FX pairs at least into the end of this trading week.

Stocks:

On Wall Street today stocks rose to new 17-month highs after the affirmation from the U.S. Federal Reserve bank that they are committed to keeping interest rates at historic lows in order to further facilitate the economic recovery.

The Dow gained 43.83 points, the S&P gained 8.95 points, and the Nasdaq gained 15.80 points.

Analysts are optimistic for the probability that the current rally in stocks will continue after the Fed rate statement today contained no negative language.

Currency pair in focus: EUR/USD

Today we are looking at the daily chart of EURUSD. We can see in this chart there have been multiple bullish pin bars with long lower tails which indicated rejection of the 1.3450 level.

The subsequent move up off this level was met by a slight pullback and then a push higher towards 1.3800. This has resulted in what is known as a “1-2-3” reversal, this is not a new concept and has been taught many times before. It is however, usually a good indicator that a change in direction is under way.

We can see in this chart that the EURUSD looks primed to break above 1.3800, once this happens higher prices into 1.4000 are very likely.

A look at the weekly price action will show you that bullish pin bars have been forming on this chart over the past few weeks as well, further adding to the validity of the current setup.