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Talking Points:

- The US Dollar continues to find support around the 95.00 level after another test overnight. Prices began to bounce around the European open, and that move has continued into the US open as the Greenback pushes towards that key resistance level of 95.53. The next major driver on the economic calendar out of the US is the inflation report that’s due for release on Friday. The expectation is for a second consecutive month of headline CPI at 2.9%.

- The bigger question is what happens at resistance on the US Dollar, as we’ve seen multiple failed attempts to breakout. A key determinant as to whether or not the Dollar trades to fresh highs appears to be driven by the dynamics in EUR/USD, and if the pair can finally test through the 1.1500 level, we’ll likely be looking at fresh highs in DXY to go along with fresh yearly lows in EUR/USD.

- 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 Bounces After Another Support Test at 95.00

The US Dollar is bouncing after another test of the 95.00 level (on DXY) in the overnight session. Yesterday, we looked at USD putting in a support test after shying away from the 95.53 level that’s now turned around multiple topside advances. Buyers showed up around the US open, and continued to drive until mid-day. Prices began to pull back during the Asian session, and for a few hours ahead of the European open, that 95.00 level came back into play.

But, just as we saw yesterday, buyers showed up and prices pushed higher; we’re now making an approach back towards that 95.53 area on the DXY chart.

US Dollar via ‘DXY’ Hourly Price Chart: Another Bounce at 95.00

us dollar hourly price chart usd

Chart prepared by James Stanley

The big question around the Greenback is whether we’ll finally be able to trade up to fresh yearly highs. It looked as though that theme was alive and ready in mid-July, but prices posed a quick turn-around following some comments from President Trump regarding interest rates and monetary policy. We discussed this premise last month in the article entitled, US Dollar Trumped at Fresh Yearly Highs: USD Pullback or Reversal?

Will we see another wild card avail itself before the Dollar surges up to another fresh yearly high? Or will this be the topside move that finally brings that bullish breakout?

US Dollar Daily Price Chart: Building into Ascending Triangle Formation with Resistance at 95.53

us dollar daily price chart usd

Chart prepared by James Stanley

EUR/USD Turns at Confluent Resistance – 1.1500 Test in Store?

Perhaps a bit cleaner is the move that’s so far showed up in EUR/USD. As we had that late-day pullback show in the US Dollar yesterday, this allowed EUR/USD to drive into the zone of resistance that we had looked at yesterday that runs from 1.1611-1.1623. This also coincided with the underside of a prior bullish trend-line, helping to add a bit of confluence to this resistance.

EUR/USD Four-Hour Price Chart: Turns at Confluent Resistance

EUR/USD eurusd four hour price chart

Chart prepared by James Stanley

In EUR/USD, the big question is whether this resumption of bearish price action can bring about another test of the 1.1509 low. This level had twice turned around downtrends in EUR/USD, in late-May and then again in June; and we saw prices pose a stark turnaround on Monday before putting in a third test of the level. But – now that a bigger area of resistance has come into play, will sellers finally be able to take this support out?

EUR/USD Daily Price Chart: Resistance at Prior Triangle Support

eurusd eur/usd daily price chart

Chart prepared by James Stanley

GBP/USD Pushing Towards Yearly Lows as the Cable Breakdown Continues

Cable is firmly trading below 1.3000 now as sellers continue to push the currency towards yearly lows. With clarity on the Brexit front unlikely until at least next month, at a minimum, combined with the dovish Bank of England from last week’s rate hike –it appears as though there are very few reasons for buyers to step in here.

GBP/USD Daily Price Chart: Cable Goes Vertical After BoE Rate Hike

GBP/USD gbpusd daily price chart

Chart prepared by James Stanley

The one possible positive factor that the pair and the British currency might have going for it at the moment is just how stretched the downside move has become. Sellers have been fairly active since this week’s open, finally pushing GBP/USD price action below the 1.3000 level in a sustained move. But – after that, prices haven’t yet really shown much for resistance; trickling higher throughout yesterday until bears showed back-up around the European open.

At this stage there are three possible areas for lower-high resistance that can be utilized with bearish strategies, going up to last week’s post-NFP high around the 1.3050 level.

GBP/USD Four-Hour Price Chart

gbpusd gbp/usd four hour price chart

Chart prepared by James Stanley

USD/JPY Support Test Continues

Last night saw the release of meeting minutes from the BoJ’s most recent rate decision, and an apparent divide is beginning to show within the bank concerning the outsized QE policy that remains in effect. This led into a report citing ‘people familiar with the Bank of Japan’s thinking’ as saying the Central Bank had previously planned to hike rates twice this year, deferring to do so once the earlier-year volatility began to show, particularly in the Yen which was strengthening considerably in Q1 of this year. The report also went on to say that the BoJ had hoped to previously signal rate hikes at their last meeting, with the intention of hiking in September, but pulled back after another abysmal inflation print.

The net impact was a dose of Yen-strength, although that Yen strength has so far been unevenly distributed as that theme is showing most vividly against weaker currencies such as the Euro or the British Pound. In the US Dollar, prices have moved back down to that key support zone for yet another test.

USD/JPY Daily Price Chart

usdjpy usd/jpy daily price chart

Chart prepared by James Stanley

We looked at timing around the pair in yesterday’s webinar, and the same approach that we shared there could continue to be utilized as support structure remains. Prices have been putting in lower-highs throughout August, so for those looking to buy, they can wait for a topside indication as shown by a break-above that trend-line, or a push to a fresh short-term higher-high, to open the door for bullish strategies in the pair.

USD/JPY Four-Hour Price Chart

usdjpy usd/jpy four 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 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