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FX Setups for the Week of September 3, 2018: USD at a Decision Point

FX Setups for the Week of September 3, 2018: USD at a Decision Point

James Stanley, Senior Strategist

Talking Points:

- DailyFX Quarterly Forecasts have been updated for Q3, and are available directly from the following link: DailyFX Trading Guides, Q3 Forecasts.

- 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.

- If you’d like more color around any of the setups below, we discuss these in our live DailyFX webinars each week, set for Tuesday and Thursday at 1PM Eastern Time. You can sign up for each of those session from the below link:

Tuesday: Tuesday, 1PM ET

Thursday: Thursday 1PM ET

Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.

US Dollar Primed as End of Summer Months Draws Near

It’s been a busy summer across the FX space, and as we look to wind down the summer months a number of themes remain of interest. Monday is a holiday in the United States in observance of Labor Day, and after the extended weekend we’ll return to a market full of workable themes and items of interest.

In last week’s FX Setups, we looked into bearish continuation possibilities in both EUR/USD and GBP/USD. And while EUR/USD put in a resistance check at the area that we were following, GBP/USD put in an aggressive topside rip that saw a challenge begin around the 1.3000 handle. As we discussed earlier today, this puts Cable in a spot where bullish strategies can remain attractive as we walk into September; while the prospect of bearish EUR/USD continuation remains, as well; meaning we have setups on either side of the US Dollar as the end of summer trading fast approaches.

US Dollar Four-Hour Price Chart: Back Above 95.00 After Grind at August Lows

us dollar four hour price chart usd

For next week – the 95.00 level remains as a big area of importance for USD price action. If we do see prices hold above this level, bullish strategies can be favored and this can be sought out in either EUR/USD or NZD/USD, as we look at below.

But – if prices fall back-below 95.00 and continue to head-lower, then we have the potential for a bigger-picture breakdown in the Greenback, and this makes the topside of GBP/USD as an attractive idea. And as we looked at last week, this could even turn the prospect of longer-term bullish continuation in EUR/USD as a workable theme should resistance at 1.1750 eventually get taken-out.

Bearish EUR/USD on Hold Below 1.1750

This has been a fast-moving pair in the month of August, and as we move into September the big question is which trend will continue to hold…

The first half of the month was marked by a continuation in the selling pressure that had become commonplace in the month of May. That May sell-off was driven by jitters around Italian politics, and the August sell-off came from fears around exposure to the ongoing situation in Turkey. Those fears around Turkey took a step back in the second-half of the month only to re-emerge in the headlines in the waning days of August. But – resistance has held in a key area, and this keeps the door open for further down-side in the pair until those prior highs get taken-out.

EUR/USD Four-Hour Price Chart: Resistance Reaction

eurusd eur/usd four hour price chart

Chart prepared by James Stanley

Bullish GBP/USD on Hold Above 1.2844

A bit of pressure was removed from the bearish theme in the British Pound this week, and while that scenario is still very new and the topside move still developing, this does open the door to the potential for strength in the currency as we move into September.

Fears around Hard-Brexit have constrained bullish runs in the pair for the past four months; acting as a constant source of pressure as prices continued with varying patterns of lower-lows and lower-highs. But when the EU’s Chief Negotiator, Michael Barnier, announced earlier this week that the EU would be open to a post-Brexit partnership with the UK, that pressure was removed and GBP quickly rallied.

As we wrote at the time, when the backdrop shifts, so should the trader. And while we’d looked at bullish positions two weeks ago, we’d flipped to a bearish stance coming into this week, looking for resistance to play-out at our prior topside target. And while it looked like that theme might play-well coming into Wednesday, price action was roiled by the early-morning announcement from Mr. Barnier and GBP/USD soon moved-up to challenge the 1.3000 level on the pair.

We’ve taken that prior topside target/resistance area and re-purposed it as higher-low support potential. That theme remains of interest as we move into next week; and as long as GBP/USD remains above the prior swing-low of 1.2844, bullish strategies can remain of interest.

GBP/USD Four-Hour Price Chart

gbpusd gbp/usd four hour price chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora of resources on 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 a plethora 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

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

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