The US dollar fell initially during trading on Monday, reaching down towards the 112.40 level. There was enough support there to have things turn around though, and as a result it looks as if the buyers are returning. I suspect that the 112 level is massive support, so it’s not until we break down below that area that I would consider the US dollar in trouble. I suspect that by the time this is all said and done, we will probably continue to go higher based upon not only tax reform coming out of America, but more of a “risk on” attitude around the world. Once we break above the 113 handle, I think the market will go looking towards 113.50, and then eventually 114.50 above, which is major resistance that extends at least 50 pips. A clearance of the 115 handle would almost assuredly make this a “buy-and-hold” scenario.
On the breaking below of 112, the market would more than likely reach towards the 111-level next, where I expect to see even more support. That being said, I think this is the least likely of scenarios, but of course anything is possible. A sudden failure by Congress to get tax reform done could be reason enough for that to happen by itself. Alternately, some type of shock to the system or geopolitical headline could also have people running towards the Japanese yen for safety. Currently though, it appears that odds are favoring the pair rising, so therefore I look at these pullbacks as buying opportunities.
Written by FX Empire