FX Setups for the Week of September 10, 2018: EUR/USD, USD/CHF
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Next Week’s Calendar Brings Focus to the Euro, ECB
Next week brings a series of high-impact events to the economic calendar, and this may finally offer a backdrop that can push the US Dollar into a directional trend. Thursday appears to be particularly busy, as a BoE rate decision earlier in the morning is followed by an ECB rate decision. This is the meeting in which the ECB had heavily implied that they’d begin slowing bond purchases; the formal announcement of which could produce a bit of positive drive in the single currency if it does, in fact, take place.
Below we look at two price action setups designed for next week’s trade. It’s important to note that each of these are designed for next week, as a gap-through support or resistance can vastly alter the setup, thereby negating its potential before it even really has a chance to get started. This is especially relevant on GBP pairs, which are not included in this week’s FX Setups, as Brexit headlines have been creating some rather chaotic volatility across Sterling crosses of late and this makes for an undesirable scenario of weekend gap-risk.
Bearish EUR/USD on Hold Below 1.1750, Add on Bearish Break of 1.1500
I’ll keep this one short (pun intended) as I’ve written about it for each of the past four weeks. Early-August saw an aggressive sell-off in the pair, largely on the basis of fears around Turkey. Those fears quickly abated mid-month, and this was followed by a bullish move that erased the entirety of those prior-month losses. But the resistance area that we’ve been following that runs from 1.1709-1.1750 continues to hold the highs, as we’ve seen play out since mid-July.
EUR/USD Four-Hour Price Chart
This keeps the door opened for Euro downside, and EUR/USD is fast approaching an area of support at 1.1530 that’s had a tendency to quell recent declines. This can make the prospect of short-term entry less attractive, so for traders not yet short, playing a pullback to resistance at prior support appears to be one of the more accommodating ways of approaching the matter at the moment.
Lower-high resistance can be sought around the 1.1600 handle, and if we do see sellers begin to show there, the door can open for bearish strategies with stops lodged above this week’s swing-high. Alternatively, short-side breakouts can be investigated upon a break-below 1.1500.
EUR/USD Hourly Price Chart: Lower-High Resistance Potential
Chart prepared by James Stanley
Bearish USD/CHF on a Hold Below .9800
On the other side of the US Dollar we have USD/CHF, which has been in the midst of an aggressive bearish run over the past three weeks. USD/CHF weakness really began to show prominently in mid-August, right around the time that DXY began to reverse: But the primary difference is that while DXY has run into support and traded in a rather messy manner, the trend has remained strong in USD/CHF. This makes the pair rather attractive in scenarios of continued USD-weakness, and below, we look at a zone of interest for bearish continuation of this move. Resistance showing within the 30-pip zone that runs from .9724 up to .9754 opens the door for bearish strategies on the premise of lower-high resistance re-opening the door for bearish continuation.
USD/CHF 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.
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--- 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.