The EUR/USD pair fell initially during the session on Monday, but as you can see bounced enough to form a bit of a hammer. The 1.18 level continues to be very supportive as far as we can tell, especially based upon the monthly chart. With that being the case, we believe in buying calls on a break above the top of a hammer. We are especially bullish above the 1.20 level, as that should open the door to the 1.2350 handle going forward. We have no interest whatsoever in buying puts in this particular pair, at least not until we close below the 1.18 level on a daily chart.
EUR USD daily
The GBP/USD pair is very similar, and its hammer sits above the 1.50 level. The 1.52 level being broken to the upside is our signal to start buying calls in this pair as we could go as high as the 1.55 level. Much like the Euro, the British pound is completely oversold at this point in time, and we have plenty of British economic announcements that could bring good news in order to facilitate this move.
Looking at the FTSE, we initially fell during the session but ended up forming a hammer as well, and we believe now that a move above the 6550 level, of sensibly breaking the top of the hammer, is much like what we see in the GBP/USD pair. In other words, it would be a call buying opportunity only in this market we would be heading to the 6650 level next. Just as in the GBP/USD pair, we have no interest in buying puts because we recognize that there is a significant amount of support below. With that, we are still very bullish of the FTSE going forward.
All things being equal, we are still bullish of US stocks, but recognize that the S&P 500 is stalling a bit. Because of this, we want to see supportive candles at lower levels in order to take care of perceived value and start buying calls. Until then we will remain on the sidelines.