The US dollar fell a bit at the open on Wednesday, breaking down to the 113.40 level. We did bounce from there, but we are starting to see resistance at the 24-hour exponential moving average, and more importantly, the support of level at the 113.75 level that previously had been so reliable. The fact that we are starting to see a bit of exhaustion there is not a huge surprise, as it is classic technical analysis. However, I believe that the market will probably go down to the 113 handle, which is even more supportive. Longer-term, I believe that we will go much higher, and that this pullback will be a buying opportunity for those longer-term traders. In the short term, I think that the market will probably continue to the downside, so short-term traders will be looking to go short. I think that the 113 level is not only supportive, but the beginning of a major support level down to the previous uptrend line that we have broken above. I suspect that a pullback at this point is simply an opportunity to try to build up enough momentum to break out above the massive resistance found at the 114.50 level. That level extends to the 115 handle, and therefore I think it may take several attempts to break out. If we do break above the 115 handle, the market should then be more of a buy-and-hold situation. Until then though, it’s likely that the volatility will continue and therefore short-term trading will probably run the show. I would be very careful about position sizing, but as we closer to the 113 level, I might be a bit more aggressive with position size as eventually we should break out to the upside, and be able to build a huge position for a longer-term trade.
Written by FX Empire