The U.S. Dollar rallies to test 78.00 after G7 weekend

The U.S. Dollar has been rallying since 5:00am EST. The base of the rally was 77.20. This move comes after the test near the psychological 77.00 handle at 77.09. It's likely that dollar buyers were waiting for the test near 77.00 and this level attracted buyers. Add to that the rally up through 77.20 and 775.0 was sure to attract more momentum players.

The 78.00 level is currently resistance and as the dollar climbs the bears will be picking their spots for the short from today's bounce. This move is hardly a reversal at these levels as the dollar would have to establish support at 78.00 to even begin that sort of discussion.

Significant resistance waits above 78.00. The key price area of 78.50 to 79.00 will be a steep climb and will likely determine how many shorts will be squeezed out and ultimately prove if there is enough buying support to level out the year long sell off in the dollar.

In the meanwhile there are buyers stepping in at 1.4134 to 1.4150 in the EUR/USD. The 1.4200 psychological level rejected the small climb higher on the EUR/USD at 1.420 as the dollar tested 78.20 support before continuing the rally.

Raghee Horner is a private forex, futures, and stock trader based in South Florida. She is the author of two best-selling forex trading books and a sought after speaker. All charts we used with permission from Autochartist and EZ2Trade Software.