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I’m still carrying some long USD/JPY exposure from the previous setup ahead of the Fed’s rate hike two weeks ago as only the first target has executed; but as we open a new week with a plethora of drivers, the bar is looks to be incredibly high for a continuation of USD-strength. But given that litany of drivers are expected to hit the headlines this week, the Dollar is set to move. Below, I look at a setup on either side of the Dollar – looking to EUR/USD for USD-weakness and GBP/USD for USD-strength.

Long EUR/USD at Market – Stops below 1.1050

Current IG Client Sentiment Showing at -2.58-to-1 (as of this writing), and this is bullish for EUR/USD.

I tried to catch a bullish move here two weeks ago but got stopped-out at break-even around the FOMC move. The motivation for the bullish side of the pair is the continued strength showing on longer-term charts as the upward-sloping channel that’s dominated EUR/USD price action for much of 2017 still applies. Over the past few weeks we’ve seen some bearish factors for the pair flare, such as another dovish ECB-outlay or the hawkish Fed hike, yet longer-term support remains respected. Stops will be set below the prior swing-low of 1.1074, with some additional ‘wiggle room’, while a revisit of resistance at 1.1280 will open the door for a break-even stop move.

Long EUR/USD at Market

Stop sub-1.1050

Break-even stop: 1.1280

Target 1: 1.1350

Target 2: 1.1500

Chart prepared by James Stanley

Short GBP/USD at Market – Stops above 1.2834

If USD strength does continue to elicit bids, I like the idea of looking for continued weakness in the British Pound. While the Japanese Yen may still provide some element of weakness, the muddy waters around Brexit combined with what has been an uber-dovish BoE could continue to provide some pressure. Another revisit of the 1.2750 resistance level this morning makes the prospect of bearish continuation appear a bit more attractive, and this can open the door to short-side setups. We looked at the technical setup last week in the article, The British Pound Breakdown.

Stops are set above the post-Election swing-high of 1.2829 with some additional cushion, with targets set towards the prior swing-low of 1.2604 and then the major psychological level of 1.2500.

Short GBP/USD at Market

Stops above 1.2834

Break-even stop move + Target 1: 1.2604

Target 2: 1.2500

Chart prepared by James Stanley

--- Written by James Stanley, Strategist for

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.