We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Mixed
USD/JPY
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Mixed
Oil - US Crude
Bearish
Bitcoin
Bullish
More View more
Real Time News
  • European Opening Calls From IG: #FTSE 7557 +0.65% #DAX 13497 +0.81% #CAC 6012 +0.68% #MIB 23902 +0.82% #IBEX 9575 +0.59% #STOXX 3761 +0.65%
  • Shanghai has raised health response level to its highest, according to People's daily
  • ICYMI: The incoming Bank of England Governor, Andrew Bailey, stated that he was concerned how ill-prepared the UK was for a market crash https://t.co/RULE0w5old
  • Have you joined @DailyFX @facebook group yet? Discuss your #forex strategies and brush up on your skills with us here: https://t.co/jtY1G7g8yx https://t.co/kfIoHUeycD
  • NZD/USD Technical Analysis: NZ Dollar Sellers Challenge Uptrend - https://www.dailyfx.com/forex/technical/home/analysis/nzd-usd/2020/01/24/NZDUSD-Technical-Analysis-NZ-Dollar-Sellers-Challenge-Uptrend.html?CHID=9&QPID=917708&utm_source=Twitter&utm_medium=Spivak&utm_campaign=twr #NZDUSD #technicalanalysis https://t.co/3tZ3xzWu05
  • What's the difference between leading and lagging indicators? Find out from @RichardSnowFX here:https://t.co/vGx8HCagF5 https://t.co/VlXWhsKt7F
  • Have you been catching on your @DailyFX #podcast "Global Markets Decoded"? Catch up on them now, before new episodes release! https://t.co/Twr44cZ1GB https://t.co/Dcr5GWwALW
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 97.13%, while traders in US 500 are at opposite extremes with 76.30%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/4CSQjjnnOa
  • Forex Update: As of 05:00, these are your best and worst performers based on the London trading schedule: 🇳🇿NZD: 0.01% 🇨🇦CAD: -0.00% 🇦🇺AUD: -0.01% 🇬🇧GBP: -0.04% 🇪🇺EUR: -0.06% 🇨🇭CHF: -0.09% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/vYOXemz2Vo
  • Indices Update: As of 05:00, these are your best and worst performers based on the London trading schedule: France 40: 0.91% Germany 30: 0.90% Wall Street: 0.14% US 500: 0.13% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/FwJ0kGFDLx
Long U.S. Dollar vs. GBP, JPY

Long U.S. Dollar vs. GBP, JPY

2017-07-26 18:34:00
James Stanley, Currency Strategist
Share:

- For trading ideas, please check out our Trading Guides. And if you’re looking for something more interactive in nature, please check out our DailyFX Live webinars.

To receive James Stanley’s Analysis directly via email, please sign up here.

This setup looks to trade a bullish reversal in the U.S. Dollar after today’s FOMC rate decision brought another bout of weakness to an already oversold market. Thursday and Friday of this week bring a series of high-impact data releases out of the United States.

The U.S. Dollar has had a difficult 2017 thus far. After riding into the New Year at 14-year highs on the back of the ‘reflation trade’, matters have turned around considerably as the Greenback has dropped by as much as -9.8% this year. There are a plethora of explanations for this weakness, and many of these reasons make logical sense. Many are expecting this move to continue, and that is where the plot thickens.

Sentiment in the U.S. Dollar has gotten slammed lower as this move has developed throughout 2017. And if few are long and many are short, the motivation for continued losses will likely need to be extremely negative to elicit new even more new sellers into the market. Combine this with the fact that the U.S. Dollar has been flashing oversold readings from a variety of metrics, and I like the odds of looking for a bullish move in the Greenback that could last for a few days to a few weeks or, maybe more.

The quandary that I do face in looking for a USD reversal is one of tactical execution. If looking for a move of USD-strength, one would likely want to look to pair the Dollar up with a currency that’s been relatively weak of recent. This would rule out the Euro, the Swiss Franc and Australian and New Zealand Dollars. As we had discussed this morning, the Japanese Yen and the British Pound could be attractive for such a play; so rather than choosing one and hoping that it works, I’m going to split this trade up in two pieces, looking for USD-strength against both the Japanese Yen and the British Pound. Each setup is described in more detail below.

Short GBP/USD

We discussed the fundamental backdrop behind Sterling in this week’s trading forecast, and with a pivotal BoE meeting on the docket for next week, we have a prime opportunity to see the BoE reiterate a dovish bias to markets. The fuel is certainly there, as last month’s inflation figures came-in below expectations. Cable is currently working on a short-term bear flag formation, so I’m going to look at placing a stop above the high set earlier in July while looking for prices to move-lower.

Long U.S. Dollar vs. GBP, JPY

Chart prepared by James Stanley

Stops above 1.3165

Target 1 + Break-Even Stop Move at 1.3000

Target 2 1.2960

Target 3 1.2850

Long USD/JPY

USD/JPY has been tricky of recent, as the bullish up-trend that was so pronounced in Q4 of last year has been rather evasive through much of 2017 as the Greenback has been so abysmally weak. But the BoJ remains passive towards inflation, and they’ve just cut inflation forecasts again; now not expecting to hit their 2% target until 2019. If we do see USD-strength show-up, I expect the Yen to be one of the weaker currencies to pair that theme up with. So, I want this stop below the recent swing-low around 110.50 so that I get taken out of the trade if this theme doesn’t show promise.

After the July FOMC statement, USD/JPY moved-down to test the bottom of the ‘big picture’ support zone that spans from 111.61-112.40, and this opens the door to bullish exposure in USD/JPY.

Long U.S. Dollar vs. GBP, JPY

Chart prepared by James Stanley

Stops below 110.50

Target 1 + Break-Even Stop Move 112.40

Target 2: 113.00

Target 3: 114.00

--- Written by James Stanley, Strategist for DailyFX.com

To receive James Stanley’s analysis directly via email, please SIGN UP HERE

Contact and follow James on Twitter: @JStanleyFX

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

DISCLOSURES

News & Analysis at your fingertips.