US Dollar, EUR/USD, GBP/USD, USD/CAD, AUD/USD Talking Points:
- This was a big week for the US Dollar, capped by an abysmal NFP report.
- Next week sees the focus shift outside of the US, with Central Bank rate decisions out of Australia, Canada and Europe.
- The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.
This week saw the US Dollar continue to sell-off, and next week brings a series of Central Bank announcements into the fold. With expectations around the Fed softening due to a combination of both increasing covid numbers and labor market weakness, next week will bring the RBA, BoC and ECB into the mix so we’ll be able to see how each of those Central Banks are planning on moving forward.
In the USD, I had looked for mean reversion in Q3 in our most recent forecast. That’s continued to show with prices continuing to pullback after the abysmal NFP report that was released on Friday.
The USD is now testing a big support level, plotted around 91.93, which is the 38.2% Fibonacci retracement of the 2011-2017 major move. The next key level below that is around 91.51, which is the current four-month-low in the USD. And beyond that, there’s a confluent zone around 91.32. On the resistance side of the USD, prior support around 92.25 looms just overhead. Beyond that, another prior spot of support exists at 92.46, after which the 92.80-92.90 zone comes into play.
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US Dollar Four-Hour Price Chart
Chart prepared by James Stanley; USD, DXY on Tradingview
EUR/USD Fresh Highs – ECB on Deck
Next week brings the European Central Bank into the fold, and the Euro has been rallying in advance. EUR/USD set a fresh two-month-high this morning after Non-farm Payrolls, albeit barely; and prices promptly pulled back after.
The resistance zone in question is a familiar one as I looked at it ahead of the NFP release, and it spans from 1.1885-1.1900. Another big resistance zone is overhead, from 1.1965-1.2000, and beyond that is another key zone spanning from around 1.2133-1.2167.
On the support side of EUR/USD, prior resistance levels remain nearby: The zone around 1.1856 could function as an ‘s1’ type of support, while 1.1797 could serve as an ‘s2.’ For ‘s3,’ traders can choose between either 1.1750 or the zone from 1.1709-1.1736, which ultimately is what helped to catch the low in the pair a few weeks ago.
EUR/USD Four-Hour Price Chart
Chart prepared by James Stanley; EURUSD on Tradingview
GBP/USD: Remains of Interest for Bearish USD Plays
There’s no Central Bank rate decision out of the UK next week but I’m including GBP/USD as I think it remains of interest for bearish continuation scenarios in the USD. I had looked at the pair a few different times over the past week with similar motive: On Tuesday, I pointed out an ascending triangle formation that I was following for a breakout, which cleared later in the week.
To learn more about the ascending triangle, check out DailyFX Education
The pair caught another bullish run after NFP and, eventually, traded above the Fibonacci level that I had talked about at 1.3879. That test helped to mark a fresh three-week-high, and that keeps the door open for bullish continuation in the pair. The next level up on my chart is around 1.3950, after which the 1.4000 psychological level comes into play. I’m spanning that up to a Fibonacci level at 1.4039 to create a zone. On the underside of price action, resistance from that ascending triangle can now be re-purposed as support, and that’s from around 1.3750-1.3768. A bit-lower is a confluent zone of Fibonacci levels, and that rests from 1.3659-1.3678.
GBP/USD Four-Hour Price Chart
Chart prepared by James Stanley; GBPUSD on Tradingview
USD/CAD: Hanging by a Thread, BoC On Deck
USD/CAD was somewhat surprising in the early part of the week: Even as the US Dollar was selling off, USD/CAD was holding a support trendline fairly well. Buyers eventually gave in and prices in the pair eventually moved-lower, but going into the weekend USD/CAD remains supported at the key psychological level of 1.2500.
To learn more about psychological levels, please check out DailyFX Education
Next week could be big for CAD: Wednesday brings a rate decision and Friday brings jobs numbers. This can keep the pair on the move. In terms of support, the next stop below that 1.2500 figure is around 1.2439, after which a Fibonacci level comes into play at 1.2386. On the resistance side of the pair, 1.2565 looms overhead, after which 1.2621 comes back into play.
USD/CAD Four-Hour Price Chart
Chart prepared by James Stanley; USDCAD on Tradingview
AUD/USD Primed for RBA
The Australian Dollar has been in the midst of a remarkable turn-around. I had followed the pair earlier in the summer for bullish USD plays and as that Dollar strength was playing in, AUD/USD was falling over. But support played in at a key spot a couple of weeks ago and since then, it’s been a one-way train.
Will the RBA wave the red flag in front of bulls next week? The next major spot of resistance overhead is around the .7500 big figure, and beyond that is a Fibonacci level at .7574. Above that, .7650 is a reference point for me, as well, taken from prior price action. Underneath current price action, the nearest spot of support that I’m following is around .7405, after which .7345 comes into the picture. After that, a major psychological level at .7250 could be looked to as an ‘s3’ type of support.
AUD/USD Daily Price Chart
Chart prepared by James Stanley; AUDUSD on Tradingview
--- Written by James Stanley, Senior Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
