The US dollar has had a very strong session on Thursday as we have broken above the 1.28 level against the Canadian dollar. That of course is a very bullish sign, as we have taken out the most recent high, and formed a “higher high". We have made a series of “higher highs” and “higher lows” over the last several weeks, and this tells me that the trend is most certainly changing to the upside.
When you look at the longer-term charts, the 1.20 handle was of course a major support level, and we are well above there now as we are at 1.2820 as I write this. Ultimately, this is a market that I think you buy on dips, as long as we can stay above the 200 day EMA which is at the 1.26 level, and of course the uptrend line. I like the idea of picking up value, and I do believe that we will continue to see the US dollar strengthen based upon the idea of tapering out of the Federal Reserve. Whether or not they actually do that might be a different story, but right now it looks as if the market is of course pricing that in. With that in mind, I am looking at buying dips and think that we are seeing a market that is likely to go looking towards the 1.30 handle.
If we were to turn around a break down below the 50 day EMA, which also would be slicing through the 1.25 handle and of course the uptrend line, thereby breaking down structure quite drastically. The market is likely to continue to see pullbacks as a likely outcome of a market that is turning around, and quite frankly when you see trends change like that it is likely that we will see a lot of noisy behavior. The market is one that I have no interest in shorting, but I do not necessarily think that you should be chasing at all the way appear. I do think that we could go as high as the 1.30 handle over the next several days, but ultimately, I think we get an even bigger move if we are going to continue to see a lot of “risk on behavior” out there.
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