The US dollar drifted a bit lower during the day on Tuesday, drifting down towards the 112 level. The 112 level has been supportive in the past, and as a result it’s likely that the buyers are coming back in based upon value. However, the longer-term consolidation area has been between the 115 level at the top, and the 108 level at the bottom. The 112 level has been important occasionally, so I think that this is a very important level that we find ourselves at. If we break down below the 111.80 level, the market is likely to reach down to the 108 handle. At that point, I am more than willing to start selling, but I also recognize that in this area could offer enough support to turn things back around and reach towards the 114.50 level again.
The volatility could be somewhat brutal as we are approaching the things giving holiday in the United States, and that will dry up quite a bit of liquidity, so we may have sudden moves out of nowhere. However, I think that longer-term we will eventually break out to the upside, and beyond the 115 handle. The 112-level holding at this point would be a very good sign, as it would show that the longer-term consolidation failed to reach towards the bottom again, and that shows a significant pick up in the longer-term overall upward momentum. If we finally get our break out to the upside, we probably go to the 118 handle. I suspect that will be the case early next year, and in the meantime, I prefer buying on the dips, unless of course we break down below the previously mentioned 111.80 level. I would be willing to buy large amounts of US dollars down at the 108 handle.
Written by FX Empire