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US Dollar Price Action Setups: GBP/USD, AUD/USD, USD/CAD, USD/CHF

US Dollar Price Action Setups: GBP/USD, AUD/USD, USD/CAD, USD/CHF

2019-11-01 19:10:00
James Stanley, Strategist
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US Dollar Price Action Talking Points:

US Dollar Drops From Resistance as FOMC, NFP Keep Sellers in the Mix

It was a big week for the US Dollar. After starting the first few weeks of Q4 with a bearish reversal, the final full week of October brought a retracement into the mix. USD price action gained each day that week until a key zone of resistance came into play just inside of the 98.00 level. That set the stage for this week with a full slate of USD drivers on the calendar, key of which was the Wednesday FOMC rate decision and the Friday release of Non-Farm Payrolls.

The FOMC helped to bring another run of weakness into the Greenback as a specific phrase in Chair Powell’s press conference implied that the bank won’t be hiking rates anytime soon. That weakness caught another run around the Friday releases of Non-Farm and manufacturing ISM numbers. The collective takeaway at this point appears to be that USD traders have little fear of a hawkish turn at the FOMC; and given the response in rates markets so far, it would seem that the expectation is for that next move, whenever it might be, to take on the form of another cut.

US Dollar Four-Hour Price Chart: Resistance Reaction

eurusd eur/usd four hour price chart

Chart prepared by James Stanley; US Dollar on Tradingview

In the US Dollar, this very much aligns with what was looked at coming into Q4 as part of the DailyFX Technical Forecast for USD. The currency was trading in a rising wedge formation, pushing up to fresh two-year-highs on the first day of October. But a strong reversal developed throughout the month and with prices now trading below that formation, the door would appear open for additional weakness. Nonetheless, the importance of balance remains, and below I look into four setups, two on each side of the US Dollar in the effort of balancing the approach as we trade deeper into Q4.

US Dollar Daily Price Chart

us dollar daily price chart

Chart prepared by James Stanley; US Dollar on Tradingview

GBP/USD Holding Inside of 1.3000

The bullish theme in the British Pound remains and, as has become usual, Brexit headlines will likely continue to take a toll. Form a price action perspective, however, the recent move has been rather clean. I had looked into the long side of the pair a few different times in October, including just ahead of the big breakout that showed in the middle of the month. Prices quickly ran up to the 1.3000 psychological level, at which point buyers pulled back on the throttle. This allowed for the build of a bull flag formation but that’s been taken-out as well at this point. But, some interest remains on the long side of the pair, particularly with a support area just underneath current price action around the 1.2900 handle. A support inflection there re-opens the door for bullish themes in the pair, targeting re-tests of the 1.2950 or 1.3000 levels.

Also noteworthy is the Bank of England ‘Super Thursday’ rate decision on the calendar for next week. A driver of this nature combined with the current backdrop could possibly be the item that’s needed to break-out above the big psychological level lurking just above current prices.

GBP/USD Two-Hour Price Chart

gbpusd gbp/usd two hour price chart

Chart prepared by James Stanley; GBPUSD on Tradingview

AUD/USD Holds Trendline Resistance

On the opposite side of the US Dollar, AUD/USD could be accommodating for a bounce in the US currency. AUD/USD had been in a stark bearish theme going back to January of 2018 with only temporary pullbacks seen along the way. In early-August trade, the pair tested fresh decade lows below the .6700 handle. But that support has since proven to be a tough level to break as multiple tests have been re-buffed, leading into the October pullback in the US Dollar.

Prices in AUD/USD are now more than 200 pips away from that .6700 level but testing a key resistance trendline. This level comes from the projection taken off of November 2018 and April 2019 swing-highs. This trendline was last in-play in July, just before AUD/USD put in a bearish reversal before pressing down to those fresh decade lows.

Noteworthy here is the RBA rate decision on the economic calendar for Monday evening in the US, early-Tuesday morning in Europe.

AUD/USD Daily Price Chart

audusd aud/usd daily price chart

Chart prepared by James Stanley; AUDUSD on Tradingview

USD/CAD Reversal Potential After BoC/FOMC Outlays

The FOMC outlay on Wednesday perhaps obscured the Bank of Canada rate decision that took place a little earlier in the day. The BoC took on a dovish tone, helping to push the Canadian Dollar lower; and in USD/CAD, this amounted to a break through a key area of potential resistance in the 1.3132-1.3150 area on the chart. Resistance finally began to set-in during the opening minutes of the FOMC press conference around the 1.3200 level. But, as USD dropped, so did USD/CAD and at this stage, the potential for bearish reversal remains.

Risk levels can be investigated above this week’s swing highs to go along with initial targets around the 1.3065 Fibonacci level. If that initial target is met in fast order, break-even stops can be utilized to go along with secondary target potential at the 1.3000 big figure that sellers were so reticent to test in mid-July.

USD/CAD Daily Price Chart

usdcad usd/cad daily price chart

Chart prepared by James Stanley; USDCAD on Tradingview

USD/CHF Grinds at Support

Back on the long side of the US Dollar and USD/CHF can remain of interest. The Swiss National Bank hasn’t exactly been shy when complaining about CHF-strength, even offering veiled threats of market intervention if the situation called for it. At this point, it doesn’t look as though those threats have been very market moving, however, as price action in USD/CHF has only continued to fall. At this point, prices are testing a key level of support around the .9850 level on the chart. This same zone helped to catch the lows in the pair over a few different instances in September as well as a couple of weeks ago; and a hold here through next week’s open keeps the door open for mean-reversion strategies, targeting a re-test of the .9950 area on the chart.

USD/CHF Four-Hour Price Chart

usdchf usd/chf four hour price chart

Chart prepared by James Stanley; USDCHF on Tradingview

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 Gold or 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 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

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

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