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Currency Market: US Dollar Index Is Breaking the 79 Support Level


The euro is finally surpassing resistance around 1.32 and could trade into the mid 1.30s.

The market is certainly a cruel teacher, and one of the most important lessons in trading and risk management is being able to admit you are wrong. The US dollar is proving me wrong today and has convincingly broken the 79 support level. As you can see in the below chart, the next major support level for the US Dollar Index is the 200-day moving average, which is down at 77.

Click to enlarge

This has been driven by the strength in the euro this morning, which finally pushed through the 1.32 resistance level and quickly ran stops all the way above 1.3250. The large short position in the euro probably needs to be unwound here before it can trade lower, and it looks like we could get a swift move in the euro into the 1.35 level. The euro short was my last US dollar bullish position, so now I have to officially move to the sidelines on being a US dollar bull, actually short it for a trade, and we'll have to see what the market wants to do from here…

Click to enlarge

Another euro cross that I think will be interesting to watch here, especially as a barometer for risk, is the euro/yen. The EURJPY is also breaking through resistance levels this morning, and if it can recapture the 102 level, it should be able to continue trending higher into longer-term resistance. The 200-day moving average is declining into the 107s, which would be the first target. A move higher in the EURJPY would be a positive tailwind for risk in general and could keep this equity bull trend chugging along!

Click to enlarge

These markets remain choppy, so be careful out there!
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Positions in EUO, EURUSD
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