- The euro initially tried to rally against the US dollar in the early part of the Monday session but then rolled over to show signs of hesitation.
- All things being equal, this is a market that I think is worth paying close attention to because it could give us the overall direction of the US dollar going forward.
- After all, we have recently formed a massive “double top, and although we shot straight back up in the air, there are questions asked about whether or not we are rolling over at this point.
CPI on Tuesday
I think the Consumer Price Index on Tuesday will be a major influence on where we go next with the US dollar, which will obviously have a major influence on this market. I’ll be watching the 1.16 level and the 50 Day EMA, currently at the 1.1563 level, to see if they get broken below. If we get a hotter than anticipated Core CPI, then I believe a breakdown below those levels could signal that the Euro may have topped. If that is in fact the case, we will see the US dollar strengthen against most things, not just Euro.
On the other hand, if we turn around and rally to break above the high from Thursday, then it opens up and attacks on that previous double top at the 1.18 level, which I think is a bit of a ceiling in the market at the moment. Ultimately, if we break above there then we will almost certainly try to break above the 1.19 level, and then the bigger figure of 1.20 above. This could be a move that will determine whether or not the market continues to believe that the Federal Reserve is going to cut rates in order to bail out Wall Street, something that they have been guilty of doing multiple times in the past. However, they have been extraordinarily stubborn about that in this economic cycle, and it has cause quite a few problems.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.