The US dollar initially tried to rally during the trading session on Friday but gave back the gains to reach towards 1.25 handle. By doing so, it looks as if we could break down through the 1.25 level, opening up a move much lower. That being said, I think that this is a situation where it is only a matter of time before we go looking towards lower levels, perhaps due to rising oil prices but we need to break down below the bottom of the hammer from the Thursday session. If we do, then the 1.24 level would be the next target, possibly followed by the 1.20 level. The 1.20 level is a major support level based upon monthly charts, and most certainly should be paid close attention to.
There are some rumblings about the US dollar bouncing a bit, and that could come into play when it comes to this pair. However, crude oil has its own influence, and recently we have seen crude oil show signs of strength as oil demand forecasts by both the IEA and the OPEC committee have suggested that we are going to see strengthening prices. The candlestick for the day is most certainly negative, so it looks as if we are ready to go lower. The 50-day EMA above also offers quite a bit of resistance, but it is worth noting that this market tends to be very choppy more than anything else.
With this being the case, and the fact that the 1.25 level continues to be an area that people are paying close attention to, it may be worth noting that a short-term bounce could be coming. However, it is not until we break above the 50-day EMA that I am willing to jump in and start buying. Even then, I think it would be a very difficult longer-term trade to hang onto. However, if crude oil starts to break down, it might make that trade a little easier to deal with, so that is most certainly something that we should be paying attention to. One thing is for sure: you should probably keep your trading size somewhat limited, as the market probably will continue to see a lot of choppy volatility going forward that could cause some issues.
