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EUR/USD: Bounce Or Break? (March 27, 2013)

EUR/USD is in tight consolidation above a major support level as the markets draw nearer the end of the month, which opens up potential profit-taking scenarios.

On the one hand, the pair could bounce back to the top of the range, close to the 1.3000 major psychological resistance, if bears book profits during the middle of the week. On the other hand, a downside breakout is also possible as there are still some economic uncertainties in the euro zone.

Stochastic isn't giving very good clues at the moment since it is right in between the oversold and overbought regions. This suggests that the pair could go either way with a 50/50 chance.

Shorting a few pips below the bottom of the tight consolidation with a wide profit target seems to offer the best reward-to-risk potential. A long stop order above the current consolidation would probably work right until the 1.2950 to 1.3000 area.