The US dollar fell a bit on Tuesday as we continue to consolidate overall. The 200 day EMA is currently sitting at the 1.2620 level underneath and is offering support. The 1.28 level above offers a bit of resistance, but I think that what we are doing is trying to build up enough inertia to make a bigger move. As long as we can stay above the 200 day EMA underneath, then we are technically bullish, but at the end of the day I think the only thing you can probably count on is a bit of choppiness.
Looking at the candlestick, although it is negative, it is not as impressive as the previous two, so that does suggest that the market is more than likely going to continue to be choppy. However, whether or not we move in one direction or the other might be a completely different scenario, and most certainly will be influenced by what happens on Friday. Keep in mind that the jobs report on Friday features not only the US jobs number, but also the Canadian ones. In other words, this is going to be “Ground Zero” as far as a reaction to the jobs numbers are concerned. Because of this, I would anticipate a lot of noise between now and then, and most certainly during the announcement.
If we were to break down below the 200 day EMA, then it is very likely that the US dollar will break down significantly, perhaps reaching towards the 1.25 handle, maybe even the 1.24 level underneath. On the other hand, if we were to take out the 1.28 level, then the market could very easily go looking towards 1.2950 level. Keep in mind that the 1.30 level above is a major barrier to overcome, and it certainly will take a significant amount of momentum to make that happen.
This is a market that will more than likely offer plenty of noisy behavior and nice range-bound trading if you are a short-term trader. Once we get those announcements coming from both Ottawa and Washington DC, then we can make a longer-term assessment as to what about to happen. Keep in mind that oil has its influence, but this week it might be based more upon the jobs report than interest rate differential.
