The US dollar initially tried to rally during the trading session on Monday but then turned around to show signs of weakening again. The 200-day EMA has offered a significant amount of resistance during the last couple of days, and it now looks as if we are trying to test the 1.25 handle yet again. Furthermore, the uptrend line that has crossed that level would be worth paying attention to as well.
f we were to break down below the 1.25 handle on a daily close, it could very well open up the possibility of more selling, especially if the crude oil market continues to strengthen in general. As I look at this chart, it is worth noting that we have formed three inverted hammers in a row, so if we were to break down, it will be one of those things that you look at in the past and recognize how easy it was to see the resistance. Alternatively, if we were to turn around and take out the 200-day EMA to the upside and by extension the 1.26 level, that would be a very strong signal and could send this market much higher.
If we do get that move to the upside, it is very likely that we could go to the 1.28 handle, which was the most recent high. If we get some type of massive selloff when it comes to risk appetite, that will almost certainly come into play when it comes to the US dollar overall. At this point, I think we are going to see a lot of noisy trading, so when I look at this chart it is likely that we will see a lot of choppy behavior and you are going to need to be very cautious about what you do next. As a result, in order to put any real money to work, you need some type of impulsive candlestick to tell you which direction it is going to go. The 200-day EMA is going to be a bit of a magnet, so it is worth paying close attention to what goes on around this area.
