Talking Points:

- The US Dollar has tilted back-towards near-term resistance after a bag of mixed European PMI’s helped to hit the Euro. EUR/USD remains at confluent resistance, finding sellers in this area now for a fourth consecutive trading day. While many are ascribing the Euro’s lack of continued descent to a calm in European politics, be careful, as that situation remains fluid and resistance continues to show.

- The lone high-impact USD announcement for this week is on the economic calendar is scheduled for 10AM ET this morning with the release of ISM Non-Manufacturing/Services Composite. US non-manufacturing industries have now seen 99 consecutive months of expansion, as indicated by a read of greater than 50. Last month, this indicator came-in at 56.8 versus an expectation of 58.2 and a prior print of 58.8. The expectation for today is 57.6.

- DailyFX Forecasts on a variety of currencies such as the US Dollar or the Euro 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.

Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.

US Dollar Holds Support, Moves Back to Confluent Resistance

The support that we looked at in the US Dollar yesterday has held through the open of the week, and prices have tilted-higher, back-towards the short-term resistance that we had looked at last Friday. This gives us current support from 93.63-93.75 while resistance resides in the confluent are bound by two different 38.2% Fibonacci retracements from 94.19-94.30. The one high-impact US data release for this week is set to be released a little later today when ISM non-Manufacturing/Services numbers are released at 10 AM ET this morning. Given the backdrop with which this range has built, that ISM number may need to print far away from the expectation of 57.6 to elicit a support or resistance break.

US Dollar Two-Hour Chart: Bounce From Support Finds Sellers at Short-Term Resistance

US Dollar usd two-hour chart

Chart prepared by James Stanley

We looked at the weekly chart of USD yesterday, and it bears repeating given the possibility of a bearish reversal after a really strong prior six weeks. Last week’s price action in DXY produced a Doji formation, and this showed just shy of the prior swing-high that was set in October of last year. Prices broke-lower to start this week but, as of right now, that short-term support has held up the declines. The big question at this point is whether sellers remain aggressive on a re-test of the short-term resistance that’s started to come into play again.

US Dollar via ‘DXY’ Weekly Chart: Last Week’s Doji at Confluent 38.2% Resistance

US Dollar usd Weekly Chart

Chart prepared by James Stanley

EUR/USD Continues to Grind at Resistance

The resistance zone that we’ve been following in EUR/USD has held into a fourth day of trade, with sellers continuing to show in the zone that runs from 1.1685-1.1736.

EUR/USD Daily Chart: Prior Support Becomes Resistance

EURUSD EUR/USD Daily Chart

Chart prepared by James Stanley

While many have ascribed the pair’s lack of continued descent to a calm in tensions around Italian politics, that situation remains fluid, and market participants likely want to keep in mind the fact that bears have yet to abate as price action has posed a mere 23.6% retracement of that recent bearish trend.

EUR/USD Four-Hour Chart: Confluent Resistance Continues to Hold

eurusd EUR/USD four-hour chart

Chart prepared by James Stanley

GBP/USD Builds into Bear Flag

For our FX setups for this week, we steered clear of the Euro and instead looked at long-USD plays via the British Pound. Sterling caught a bid last Friday that helped to firm prices up towards the 1.3400 level that we were following on the pair, and this opened the door for short-side setups. Of note is a brewing bullish channel in the pair as prices have bounced from fresh 2018 lows. Given the prior bearish trend, this shorter-term bullish channel in GBP/USD remains corrective in nature as a bear flag formation, and this keeps the door open to bearish strategies in Cable, as this is one of the more attractive ways to look for a continuation of US Dollar strength at the moment.

GBP/USD Two-Hour Chart: Building Bear Flag Formation

GBPUSD GBP/USD Two-Hour Chart

Chart prepared by James Stanley

GBP/JPY Tests Key Resistance

Also of interest on the short side of the British Pound is GBP/JPY. The pair has run-up to a key level at 147.03, and sellers have shown thus far. This is the same level that helped to produce a double-bottom in Q4 of last year, then providing support swings over two separate days earlier in May. We used this level for short-side setups in GBP/JPY just a couple of weeks ago before the pair turned-lower, and with prices back to this level, the door remains open for additional shorts should this resistance hold.

GBP/JPY Daily Chart

gbpjpy GBP/JPY daily chart

Chart prepared by James Stanley

Short-USD Plays Open Up

With the US Dollar tilting back-up towards near-term resistance, the door is opening on a couple of short-side USD setups that we’ve been following. In our FX Setups for This Week, we looked at the bullish side of both AUD/USD and NZD/USD as ways of working with bearish USD-exposure. In both setups, we needed to look for a bit of a pullback as prices had posed a quick and fast topside break to open the week. With each of those pairs seeing price action now tilting back towards the areas of higher-low support that we were looking at, the door remains open for bullish strategies.

In AUD/USD, the area of interest resides around the .7600 psychological level. This is a prior swing-high, and after prices broke-through on Friday, bulls retained control until we saw resistance come-in around prior support of .7650. With prices now starting to test this support zone, the name of the game is confirming that buyers may actually react.

AUD/USD Four-Hour Chart

audusd AUD/USD Four-Hour Chart

Chart prepared by James Stanley

In NZD/USD, the backdrop is a bit longer-term as the context is a multi-year range that’s been in-force since June of 2016. When USD-strength started to show in mid-April, NZD/USD hurriedly filled-in the bearish side of that range formation. But, after starting to test support a couple of weeks ago, that bearish drive slowed and, eventually, buyers began to tilt prices higher.

NZD/USD Weekly Chart: Two-Year Range Remains

nzdusd NZD/USD Weekly Chart

Chart prepared by James Stanley

The open of this week marked a bullish break above the psychological level of .7000, and this is the area that we’re following for higher-low support in the pair. Similar to AUD/USD above, the pair has dropped back to this support zone, so the key at this point is confirming that buyers will, in-fact, react. A hold of support here opens the door for stops below the prior swing-low of .6950, with targets directed towards .7100 and then the beginning of range resistance at .7200.

NZD/USD Four-Hour

nzdusd NZD/USD Four-Hour 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.

Forex Trading Resources

DailyFX offers a plethora 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