The US dollar has fell initially during the trading session on Tuesday but continues to look at the 1.20 level as an area that is worth paying attention to. After all, it is a large, round, psychologically significant figure, and an area that a lot of people would be paying close attention to. That being the case, it is not a huge surprise that we turned around to break higher and form a bit of a hammer. Obviously, that hammer is a bullish sign, and a sign that we have a significant amount of support. It would not be a huge surprise to see this market bounce a bit from here.
If we did break down below the 1.20 handle, then the market is likely to see more downward pressure, reaching towards the 1.18 level based upon what we have seen in the past. This obviously would probably show a lot of volume coming into the market, as it would be a huge “flush” in the overall attitude of this pair. That being said, I believe that we could very well bounce from here and go looking towards the 1.22 level, which is an area that previously had been resistance, so I think buyers and sellers will look to meet at that level as well.
We are obviously in a downtrend, so you should simply be looking for selling opportunities. I would not get sucked into the idea of buying this pair, because if we were going to change the overall trend and attitude of this market, then we will have multiple opportunities to get involved. It is worth noting that this is an area that is significant on the monthly charts, so if we do see a turnaround it will be a longer-term move, and we will have plenty of chances to get involved. Furthermore, if we break down, then it becomes that much bigger as far as the sell-off could be. Pay close attention to crude oil, because if it does break out from the ascending triangle it is sitting in, that might be the catalyst to send this pair lower. In the meantime, I believe that we will see quite a bit of noise in this general vicinity.
