- The US dollar has rallied a bit during the trading session here on Monday as chaos continues around the world.
- The US dollar is looking at the 1.3550 level as a potential support level, and I think it is worth watching very closely that the level is now potentially at least trying to form a bit of a double bottom.
- If we in fact do get this double bottom holding here, then you have a situation where we could go testing the 50 day EMA.
All things being equal, this is a market that I think given enough time probably goes looking not only to the 50 day EMA, but perhaps higher.
Tariffs
Donald Trump announced that there will be new tariffs on South Korea and Japan going forward in August, and that seems to have more of a risk off type of attitude around the markets. I do think that this is a situation where most traders are going to be looking for the US dollar to perhaps offer a little bit of safety.
When you look at the US dollar against the Canadian dollar, this is an area that’s been pretty important over the last couple of years. So, the bounce makes sense. It’s really not until we break above the 50 day EMA that I’m a little bit more convinced though. And as a result, I am a little bit tentative at the moment, but I do think we have a situation where people are going to be looking for a potential double bottom that could send this market to the 1.40 level.
Remember the United States and Canada still do not have a trade deal and that could cause chaos here as well. It appears that we are headline driven yet again, making trading very difficult and risk management the biggest part of your trading. That should be the case any day. But in this type of environment, it’s absolutely paramount that you keep your position size small.
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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.