I wrote on Wednesday last week that we had a close fight between bulls and bears and it was hard to tell who is going to win over the medium term. I thought that the best potential trade would be a long from $1.1261 or $1.1250. Although those levels were never quite reached, I was correct to see the best odds as on the long side, as has been proven by the slow rise over the past week leading to yesterday’s breakout beyond the $1.1400 area.
The Forex market is clearly dominated by weakness in the US Dollar, which has been prevalent for some days, and was driven technically by a longer-term rejection of a key resistance level in the US Dollar Index. This weakness was confirmed yesterday by the increasing pace of US CPI (inflation) which has had the effect of sparking a further selloff in the US Dollar. Almost every currency has risen against the USD in recent hours and the euro is no exception despite its recent relative weakness as a currency, which can be clearly seen when you look at a chart of EUR/GBP for example.
It looks like the odds are clearly with the bulls on the long side, but the US Dollar Index is sitting in a potentially supportive price zone now and looking at the price chart below we can see the price has been held over recent hours by the resistance level at $1.1456. I am not convinced that we will see a break above this level today, but I think the best potential is still on the long side. Therefore, my ideal longer-term setup for this currency pair would be a retracement to the support level at $1.1394 with a bullish bounce there. In the meantime, a short scalp from a bearish rejection of $1.1456 is likely to be the best opportunity, but probably will need to be taken and managed on a short time frame.
The Forex market is clearly dominated by weakness in the US Dollar, which has been prevalent for some days, and was driven technically by a longer-term rejection of a key resistance level in the US Dollar Index. This weakness was confirmed yesterday by the increasing pace of US CPI (inflation) which has had the effect of sparking a further selloff in the US Dollar. Almost every currency has risen against the USD in recent hours and the euro is no exception despite its recent relative weakness as a currency, which can be clearly seen when you look at a chart of EUR/GBP for example.
It looks like the odds are clearly with the bulls on the long side, but the US Dollar Index is sitting in a potentially supportive price zone now and looking at the price chart below we can see the price has been held over recent hours by the resistance level at $1.1456. I am not convinced that we will see a break above this level today, but I think the best potential is still on the long side. Therefore, my ideal longer-term setup for this currency pair would be a retracement to the support level at $1.1394 with a bullish bounce there. In the meantime, a short scalp from a bearish rejection of $1.1456 is likely to be the best opportunity, but probably will need to be taken and managed on a short time frame.