The US dollar has bounced just a bit during the course of the trading session on Thursday as the 1.25 level has offered a significant amount of support yet again, as we tend to pay attention to this level quite often. The uptrend line that I have drawn on the chart is still holding so far, and therefore think it only makes sense that we would rally a bit. The market is currently sitting between the 50 day EMA and the 200 day EMA, so this of course also causes a little bit of a “squeeze” in the market.
If we were to break down below the 1.25 handle, the market then has to worry about that 50 day EMA that we have been paying attention to. Ultimately, the market is on the precipice of making some type of decision, and as a result I think that the next major impulsive candlestick could give us a bit of a “heads up” as to where we are going next. If we were to break above the 200 day EMA, then the market would then break above the 1.26 handle and go looking towards 1.28 handle. The US dollar is strengthening enough to make this happen, despite the fact that crude oil still looks somewhat bullish.
Speaking of crude oil, but suddenly spikes, which could push this market lower, but it does not necessarily have to. A breakdown below the 50 day EMA opens up the possibility of a move towards the 1.20 handle underneath, which is a large, round, psychologically significant figure and an area where we have seen monthly charts show a significant reaction. Because of this, the 1.20 level will continue to be very difficult to overcome by the sellers, but if they do send this market below there, things could get quite ugly.
To the upside, if we can clear the 1.28 level then we will have made yet another “higher high”, after making another “higher low.” This of course signifies that we are going to go higher and therefore I think I would become very bullish of this pair from a longer-term standpoint. This is not could be easy to do, but it certainly looks as if it is possible based upon the 10 year yields in America in the way they have greatly influenced the currency markets.
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