The EUR/USD pair went back and forth during the trading session on Thursday, using the 1.2350 level as support, an area that has been both support and resistance as of late. The uptrend line underneath should continue to keep this market afloat, and I believe that the buyers will continue to jump into this market to pick up value as it presents itself. If we can stay above that uptrend line, then the market will continue to be a “buy the dips” situation. If we were to break down below that uptrend line, I think that the market could go to the 1.21 level underneath. That area is massively supportive.
Ultimately, I believe that the 1.25 level will be broken to the upside, and I think that we will eventually go to the 1.32 level based upon breaking above the top of a weekly bullish flag several months ago. I think we are trying to build up the necessary momentum to break out to the upside, but it continues to be very difficult. I think that given enough time, we will find buyers being the victors in the end. I think that short-term traders will continue to come in and pick up little bits and pieces of the Euro as well, so it’s essentially a “two speed market.” I believe that the market will continue to be very difficult, but eventually we will get the necessary momentum. Because of this but be bullish until that uptrend line gets broken to the downside.
The British pound has pulled back slightly during the trading session on Thursday, but then rallied rather significantly, reaching towards the 1.4250 level. If we can break above there, the market will then go to the 1.43 level above, which of course is an area that is psychologically important due to the round number, but I also believe that a break above that level should send to the market towards the 1.45 level above. That’s an area that will be difficult to overcome, but if we do it’s very likely that we continue to go much higher.
I believe that short-term pullbacks continue to offer value, extending down to at least the 1.40 level underneath. I like the idea of going in slowly and adding as the trade works out in our favor, because I do believe that eventually with the Bank of England looking very likely to raise interest rates, the British pound will continue to climb. This will be especially true once we get some type of resolution to the negotiations between the European Union and the United Kingdom. Ultimately, the British pound will get it a bit of a relief rally due to some type of certainty if nothing else. Ultimately, I believe that the 1.40 level underneath should be the hard floor in the market, so I like the idea of picking up value when it shows itself.
The Australian dollar went back and forth during the trading session on Thursday, reaching to the 0.78 level. The market has pulled back since then, but I think there is more than enough support underneath to continue to keep buyers involved. The market continues to be very noisy, but I do think there is a major amount of buying pressure underneath. Ultimately, I believe that the market should continue to find value on these dips, and I believe that if we can continue staying out of some type of trade war between the United States and China, it’s likely that the Australian dollar will benefit from this. This is because Australia is one of the major suppliers of commodities to China, so it makes sense that people use the Aussie dollar as a proxy for China.
Ultimately, I believe that the 0.77 level is a major floor in the market, and to be honest I would be quite surprised if we broke down below that level. If we do, then I think it’ll be much more difficult to put money to work. This is because there is a major up trending channel that has its bottom just below. I think that ultimately, it’s likely that the market will continue to go higher, perhaps reaching towards the 0.80 level, and then possibly the 0.81 level. Longer-term, I believe that the market should continue to see buying on dips, and a continuation of the uptrend channel that we have seen formed since late 2015. Currently, I have no interest in shorting this market in the face of so much bullish pressure.
The US dollar went back and forth during the trading session on Thursday, banging up against the 107.50 level, but finding support on these dips. I think that as you zoom out and look at the hourly chart, it becomes obvious that the market is trying to break out above this resistance barrier. If we can break above the 108 handle, then I think that the market should go to the 110 handle. That is an area that of course would be very interesting, and I think that the market breaking above there could bring in a fresh longer-term move to the upside. In the meantime, I suspect that we will get the occasional pullback that is thought of as value, as I think there is a massive floor in the market closer to the 105 handle. The 105-level underneath is not only a psychological support level, but it is also where an uptrend line coincides quite nicely. If we were to break down below there, the market probably drops down to the 100 handle, which is vital due to the psychological aspect of the number.
Longer-term, I believe that we are trying to form some type of base in this pair, and if that’s the case we could go much higher over the next several years, as it gives us an opportunity to build more of an investment and less of a quick trade. Ultimately, this is a market that should continue to be noisy and move upon headlines and corporate earnings as we are in the middle of the earnings season in America.