The US dollar has gapped higher initially during Monday trading, but then turned around to break down significantly. By breaking down below the bottom of the gap, it forms a very negative outlook for the pair. We fell rather significantly towards the 106.35 level, and then bounced a bit. However, as I record this video, it looks as if we are trying to roll over at the 50-hour exponential moving average. In general, I believe that the US dollar will continue to be soft, but this pair is a bit different than many of the others as it has a certain amount of risk appetite priced into it. What I mean by this is that as stocks go higher, typically that will put upward pressure on this pair, and vice versa.
I recognize that we had recently broken below a significant support barrier in the form of the 107.50 level, and by doing so it certainly puts bearish pressure on this market. However, I recognize that there is a lot of support underneath, especially near the 105 handle. In other words, although I recognize this as a market that is bearish at the moment, I think that the losses are somewhat limited. Short-term scalping to the downside might be the best way to trade this market, as I expect a significant amount of noise in this market. If we were to break above the 108 level, at that point I think that the market goes much higher.
Written by FX Empire