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EURUSD, AUDUSD, USDCAD and USDJPY Talking Points:

  • It was a brutal week in the US Dollar as bears began to take control, opening the door for the initiation of fresh longer-term bearish themes. The degree with which that weakness priced-in across various currency pairs can be helpful for staging strategy for next week.
  • The US Dollar has caught support at a key Fibonacci level around 96.47, and in this article I look at a pair of setups on either side of the Greenback.
  • DailyFX Forecasts are published on a variety of currencies 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.

US Dollar Bears Take Control

It was a brutal week in the US Dollar. Just last Thursday, the US Dollar made a fast move towards the two-year-high, falling short before sellers came into play last Friday. That bearish theme has continued, with aggression, throughout this week as a couple of different items pointed in the same direction. Jerome Powell offered some dovish commentary on Tuesday, and on Friday, a disappointing NFP release helped to further the bearish theme.

At this point, the US Dollar is sitting at fresh two-month-lows and next week brings the potential for more. But, with that said, the currency is oversold from a number of metrics, and this could present a backdrop in which the USD is due for a bit of a bounce, even if only temporary. Below, I look at two setups on either side of the US Dollar, looking to capitalize on whichever theme ends up taking over after this recent ramp of volatility.

US Dollar Weekly Price Chart

us dollar usd weekly price chart

Chart prepared by James Stanley

Bullish EURUSD on Hold Above 1.1250

Going along with that USD sell-off this week has been a bullish theme in EURUSD. That bullish theme has shown up despite the brewing risks around the Euro-Zone and the continued pace of dovishness at the ECB. But – those items aren’t necessarily new, whereas this re-pricing of US rate expectations is; keeping the door open for an extension of further gains in EURUSD.

EURUSD broke above a bearish trend-line this morning and is currently sitting at fresh two-month-highs. So, this may not be the most operable area to chase the pair-higher at the moment. But, a pullback to support, with respect of the pre-NFP swing-low around 1.1250 keeps the door open for further topside in the pair. This can expose a run up towards the prior zone of range resistance that runs from 1.1448-1.1500.

EURUSD Eight-Hour Price Chart

FX Price Action Setups in EUR/USD, AUD/USD, USD/CAD and USD/JPY

Chart prepared by James Stanley

Bearish AUDUSD on Hold Below .7070

This week brought the peculiar scenario of a ‘rate cut rally’ in the Aussie, as the pair rallied up to fresh near-term-highs as the RBA cut rates to a record low of 125 basis points. This, of course, is due to the plunge in the US Dollar over the past week which similar to the scenario in the Euro above, comes from the fact that something ‘new’ is getting priced-in around USD while the harboring pessimism around the Aussie has been here for some time.

The big question is whether this week’s move in AUDUSD has more room to run and, if it doesn’t, this could be an interesting area to start following for reversal potential. Prices are currently testing a zone looked at for resistance earlier this week that runs from .7000-.7019. If price action remains below the May swing-highs after next week’s open, the potential for short-side reversal strategies can begin to get more attractive. This can allow for a more down towards .6960 with secondary target potential around last week’s support, taken from the .6900-.6910 area on the chart.

AUDUSD Four-Hour Price Chart

audusd aud usd price chart

Chart prepared by James Stanley

Bullish USDCAD on Hold Above 1.3250

It’s been a stark turnaround in themes around USDCAD. The pair broke-out to fresh five month highs just last week following the Bank of Canada rate decision. That move topped-out at the 1.3565 area, and since then bears have come back, with aggression, to push prices down to fresh monthly lows.

But USDCAD is testing a previously key area of support, taken from the 1.3250-1.3300 area on the charts, and if buyers are able to hold the lows above the psychological level around 1.3250 after next week’s open, the potential for reversal strategies can become more attractive. This can allow for target potential around the 1.3300 handle, followed by the 1.3361 level that temporarily helped to hold support earlier this week.

USDCAD Daily Price Chart

usdcad usd cad price chart

Chart prepared by James Stanley

Bearish USDJPY on Hold Below 108.70

Above are a series of reversal scenarios or contrarian themes, largely looking for the risk aversion theme that showed-up in May to continue to dissipate after Chair Powell’s comments earlier this week. But – the potential for risk aversion does remain, and traders would be remiss if they didn’t at least consider the possibility of continued volatility expansion given the way that the month of May panned out.

In the FX-world, few currencies are as attractive in themes of risk aversion as the Japanese Yen. As looked at in Thursday’s webinar, the USDJPY pair has already experienced a volatile 2019, with a significant surge of Yen-strength after the open of the New Year slowly dissipating until, eventually, risk aversion came roaring back in early-May.

This week’s resistance showed-up at a key area on the chart, similar to what happened last week; and this continues a pattern of lower-lows and lower-highs in the pair that’s now more than a month old. If sellers are able to hold resistance inside of the 108.70 area on the chart, the door can open for bearish continuation down to the next Fibonacci level from a sequence that’s provided a number of inflections already in 2019. That level runs around the 107.00 handle, and tarders can look at tighter targets and potentially break-even stop moves on a test of the 107.50 psychological level.

USDJPY Eight-Hour Price Chart

usdjpy usd jpy eight 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 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as USD/CAD, 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