US Dollar Runs into Resistance; EUR/USD Brewing Potential Bear Trap
US Dollar, EUR/USD, GBP/USD Price Analysis
- US Dollar bulls have made a strong showing through early-February trade.
- The Greenback finally found some element of resistance yesterday.
- EUR/USD has stalled just shy of the two-year-low: Do bears have enough ammunition to force a breakout?
US Dollar’s February Fling Finally Finds Resistance
The US Dollar has held at resistance, finally finding some element of pause in the February launch that’s seen the Greenback continue to claw back Q4 losses. That bearish trend from last quarter has turned on a dime, and after a quick pullback following the January FOMC meeting, buyers have been in-control with price action pushing up to the 78.6% Fibonacci retracement of the Q4 reversal.
Later today brings day two of Jerome Powell’s Humphrey Hawkins testimony on Capitol Hill, this time in front of the Senate Banking Committee after yesterday’s Q&A with the House Financial Services Committee.
US Dollar Daily Price Chart
EUR/USD: Bear Trap or Loading Up for Breakout?
Going along with that rather clear move of USD-strength so far in 2020 trade has been a discernible downside push in EUR/USD. While the Euro spent the bulk of Q4 in some form of range, sellers came back into the fray on January first and have remained in-control ever since.
Last week brought a breakout from a key support area around the 1.1000 handle that had held multiple inflections already. And after a quick pause around the subordinated support area around 1.0955, sellers continued to push and, at this point, price action is nearing the 1.0900 psychological level.
Lurking ominously below is the two-year low at 1.0878 and, as yet, sellers haven’t appeared ready for a re-test. This could be setting up a bear trap scenario given that diminishing bearish momentum and, instead, can focus approaches on either breakouts below that low or, a pullback to find resistance at that prior area of support, taken from around the 1.1000 handle.
EUR/USD Daily Price Chart
GBP/USD Moving Back for a Re-Test of 1.3000
Sellers came back into the Pound around the February open, posing a stark directional shift from the currency’s price action in the month of January. In GBP/USD, that Sterling weakness has come along with a really strong US Dollar, and to finish last week, prices slid down to a fresh two-month low in the pair.
So far this week, retracement has been on the cards and price action has posed a push back-up to a prior support zone. For those looking at long-USD scenarios, this can remain an item of interest.
GBP/USD Four-Hour Price Chart
--- 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.