US Dollar Talking Points:
- The US Dollar remains messy on a near-term basis, and EUR/USD may be showing another bear trap scenario.
- USD/CAD has begun to sell-off, opening the door for short-side scenarios; while AUD/USD may remain as attractive for long-USD scenarios.
- DailyFX Forecasts are published on a variety of markets such as Gold, the US Dollar or the Euro and are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.
The US Dollar remains in a vulnerable, albeit trendless short-term state at the moment. Last week’s dizzying sell-off came in on the back of the Friday fireworks revolving around US-China tariffs. This pushed the Greenback down to fresh weekly lows, but this week opened with a bullish gap and buyers continued to push the bid yesterday, scaling prices back-above the 98.00 level on DXY temporarily. This could make for a difficult environment for directional prognostications on the Greenback; but, there are various spots of interest where either the short or long side may become attractive.
US Dollar Two-Hour Price Chart: Change-of-Pace to Start the Week
Chart prepared by James Stanley; US Dollar on Tradingview
USD/CAD Breaks Down, Bearish Potential
USD/CAD has been fairly clean over the last few months despite the fireworks on the fundamental side of the US Dollar equation. The pair put in a very noticeable sell-off in June as both USD-weakness and CAD strength were pricing in, the latter of which was pushed by strong inflationary pressures in Canada from the month of May. USD/CAD pushed all the way down towards the 1.3000 handle after previously finding resistance above 1.3500, and for a two-week period in mid-July postured without encroaching upon the psychological level. This led to the build of a falling wedge formation, which will open the door for bullish reversals, and that began to fill-in during late-July and early-August.
For the past two weeks, USD/CAD has held resistance around the 1.3350 area on the chart. Last week brought another strong inflation print out of Canada, helping to prod a bit of strength into the Canadian Dollar, and this can keep the pair attractive for bearish themes in the near-term.
USD/CAD Two-Hour Price Chart
Chart prepared by James Stanley; USDCAD on Tradingview
EUR/USD: Back to Bear Trap?
Some pretty negative factors have come out around the Euro-Zone of recent. Politics remain an item of vulnerability, particularly with the still-evolving situation in Rome. The European Central Bank appears headed for yet another rate cut, deeper into negative territory, and there’s even the potential for a ‘significant’ QE package from the bank in the not-too-distant future.
The only problem is that, at this point, EUR/USD hasn’t really shown much of that pain. The currency did spike down to a fresh two-year-low in early-August but, that was more related to the FOMC rate cut than anything else. Since then, these bearish drivers have merely pushed prices down to higher-low support, with sellers again reticent to push too aggressively with the 1.1000 psychological level lurking so nearby.
Given the events of August, one factor is fairly clear, and that’s the importance of USD-strength to short-side themes in EUR/USD. And with the Fed remaining in a seemingly dovish state with much more room for them to get even more dovish, the question remains as to whether the Euro may actually break-down in the near-term.
This means that for those looking at USD-strength strategies, there may be more attractive venues elsewhere.
EUR/USD Eight-Hour Price Chart
Chart prepared by James Stanley; EUR/USD on Tradingview
Sterling Strength Continues
In what might be a surprising move, the British Pound has put together a couple of weeks of strength even as the US Dollar has remained messy. A long-term trendline came into play on the pair in early-August and throughout the month has helped to build a semblance of support.
GBP/USD Monthly Price Chart
Chart prepared by James Stanley; GBPUSD on Tradingview
GBP/USD is currently pressing towards fresh monthly highs around the 1.2300 level, catching a higher-low yesterday from a trendline projection.
GBP/USD Two-Hour Price Chart
Chart prepared by James Stanley; GBPUSD on Tradingview
AUD/USD: Breakdown Potential?
On the long side of the US Dollar, AUD/USD can remain as attractive. A descending trendline has helped to hold the highs while support has continued to show in the .6743-.6750 area of prices. Given the two recent probes below the .6700 handle, each of which has so far been re-buffed, and AUD/USD continues to bring bearish potential should sellers remain persistent inside of the .6800-handle.
AUD/USD Four-Hour Price Chart
Chart prepared by James Stanley; AUDUSD on Tradingview
To read more:
Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts have a section for each major currency, and we also offer a plethora of resources on Gold or USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.
Forex Trading Resources
DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.
If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.
--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
