The US dollar has initially pulled back during the session on Monday but turned around to rally rather significantly and reached towards the 107 handle. At this point, I believe that there is a lot of noise in this market, and I feel that we are trying to build a bit of a base. If we can break above the 108 handle, then I think that the market will be free to go much higher. Remember, this pair tends to move with overall risk appetite, so pay attention to the stock markets and futures markets as to what they say about risk appetite overall. If risk appetite is strong, then that typically will lift this market. I believe that if we make a fresh, new low, the market will probably reach down towards the 105 handle.
The Australian dollar has been very noisy on Monday, reaching as high as the 0.79, and as low as 0.7825 as well. I think that the market will continue to be very noisy, but I believe that the buyers are starting to come in and start picking up value when it appears. If we can break above the 0.79 level, the market should reach towards the 0.80 level which is a significant level on longer-term charts. A break above that level has the market targeting the 0.81 handle, which is the gateway to much higher levels, as we should have more of a “buy-and-hold” attitude to the markets.
If we break down below the 0.7775 level, the market will probably reach down to the 0.75 handle. It’s very likely that we will continue to be bullish though, because we have recently made a “higher low.” Ultimately, I think that we are simply trying to build up enough momentum to finally break out to the upside, something that will take a significant amount of work.