On Monday the 8th of October, trading on the euro closed down against the dollar. The dollar made gains against most of the majors, although most of these gains were erased during the US session. With a bare forex economic calendar and holidays in the US and Canada, there wasn’t much to trade on. The US stock market was open, but the securities market was closed. Aside from the dollar’s rise, the euro also felt the pressure from Italy’s budget crisis. Italian bond yields surged, which led to an increased spread between Italian and German bonds. Markets now await the European Commission’s verdict on the Italian budget. Day’s news (GMT+3): 09:00 Germany: trade balance (Aug). 15:15 Canada: housing starts (Sep). Fig 1. EURUSD hourly chart. Current situation: My expectations of a flat on Monday were unfounded. As the US and Canada took a day off, Italy’s budget took centre stage. What happened in the end? We got a drop to 1.1460 followed by a bounce to 1.1490. The pair is currently trading at 1.1496. The rate has returned to the lb line. When this happens, it means that the situation is 50/50. What can we expect from markets this Tuesday? So, the pair has risen above 1.1484 (low from 5th of October). This means that we can take a closer look at the possibility of a double base (1.1463 and 1.1460). In order for this model to fully form, the bulls need to break the resistance, which was acting as a support yesterday. The quicker the rate returns to the 67thdegree (1.1540), the higher the probability of rising to 1.1590. Yesterday’s candlestick has a long tail; a factor that favours the bulls. The euro crosses provide a mixed picture. So, if the dollar goes on the attack, a euro selloff will most likely begin from around 1.1505 – 1.1514. If we draw a channel from 1.1463, 1.1460, and 1.1550 levels, then the pair is currently trading in the middle of this. The trend is bearish, so it’s safer to short the euro than it is to buy it. Seeing the double base makes one reluctant to do so, however. Personally, I think it’s a safe bet to enter a short position somewhere between 1.1540 and 1.1550. With this pricing model, I doubt we’ll be revisiting 1.1460.