- The US dollar continues to be somewhat noisy in general and against certain currencies like their Norwegian krone.
- It is very important to pay close attention to where we are right now, as we are at a major inflection point.
- The 10.65 level, of course, is an area that has been both support and resistance multiple times in the past, and the fact that we slammed into it suggests that perhaps we could see an attempt to break down.
However, not only do we have the market memory here, but we also have the 200 day EMA offering support that could come into the picture as well. If we turn around and break above the 10.73 level, though, that would be very bullish. The question is, are we forming a basing pattern or are we chipping away at support? I think this should be a very interesting market to pay close attention to, due to the fact that we have to look at what the knock on effect might be against other smaller currencies, depending on what happens with the US dollar here.
What if we fall?
If the US dollar fails against the Norwegian krone, then it probably fails against multiple other currencies and therefore you can use it as a bit of a secondary indicator if you will. That being said, I like the idea of taking advantage of any type of bounce and most certainly a breakout. If we do break down, the 10.50 level would be the next target followed by the 10.40 level.
I do think that is the more difficult path of the two, though, and I'm looking for signs of life and a bounce to take advantage of the interest rate differential as minuscule at best. So, interest rate policy doesn't really come into play here. With that in mind, keep in mind that the market is probably going to be paying more attention to the US dollar than anything else when it comes to this particular setup and trade. We are about to have a bigger move, and it's going to be your job to wait for the market to tell you which direction to be trading.
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