The US dollar has rallied a bit during the trading session on Tuesday to reach all the way to the 1.26 level before pulling back. By doing so, the market ended up forming a shooting star, which of course is a negative sign. However, the market had previously formed a hammer, which was preceded by a shooting star. In other words, we are chopping away but it is obvious to me that the 1.26 level above is significant and of course the 50 day EMA above would cause significant technical resistance.
That being said, if we were to turn around a break above the top of the shooting star it would be a very bullish sign and could send this market much higher. The 50 day EMA of course could cause some selling pressure as well so at this point time we would need to see a catalyst for this market to go much higher, which would be something along the lines of the crude oil markets falling again, or perhaps yields in America rising. Recently, the crude oil market has been extraordinarily volatile and has shown signs of weakness so that could be the catalyst.
At this point in time, there are a lot of mitigating factors as to why the markets may move, not the least of which would be the fact that oil had been overbought for so long. Furthermore, there are a lot of questions as to whether or not the global economy is going to be a strong as once thought, as France and Germany both have just locked down their economies again. Beyond that, we are sitting at a major support level on longer-term charts, and therefore it would not be surprising at all to see the market rally from here because of that as well. With that being said, if we were to break down to a fresh, new low, it could open up a huge move to the downside so at this point in time it is going to be interesting to see how this plays out.
I think the one thing you can probably count on here is the fact that the market is going to be very noisy, which of course is what you would expect at a major turning point on monthly charts. However, if we were to break above the 50 day EMA on a daily close, that could bring in even more buying.
