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EUR/USD Falls to Yearly Low as Euro, Italy Worries Take Center Stage

- EUR/USD has fallen to a fresh yearly low to start this week’s trade, and this week sees the ongoing saga between Brussels and Rome move back into the spotlight, as tomorrow marks the due date for Italy’s revised budget. At this point, neither side looks willing to give, and that can continue to create pressure in European markets until some element of resolution is found. This was looked at in this week’s Weekly Technical Forecast for Equities, specifically focusing on an area of resistance in the DAX after last week’s recovery began to falter.

- Going along with that fresh yearly low in EUR/USD is a new high in the US Dollar via DXY. The currency gapped-higher on the open and, as of yet, hasn’t pulled back to fill that gap. This is a breakout that could be difficult to chase at this point; but the bullish structure is there and the area around this unfilled gap becomes of interest for higher-low support potential. For USD fades, a couple of markets remain interesting in NZD/USD and AUD/USD. For a continuation of USD-strength, both EUR/USD and GBP/USD remain attractive.

- 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.

A Big Week for the Euro

It’s a big week for Europe as the Italian budget saga moves back into focus. Tomorrow is the date in which the revised Italian budget is due in Brussels and, at this point, neither side looks ready to compromise. Opening the week, the Euro is falling further after last week’s reemergence of weakness. EUR/USD had started November on strong note, bouncing from the failed attempt to take-out the 1.1300 level in late-October. That bounce saw prices put in tests at 1.1448 and again at 1.1500 as buyers continued to push to higher-highs. But, as looked at last week, that 1.1500 test was what brought sellers in to the degree that 1.1330 could be threatened. And to open the week, that 1.1300 low has already been taken-out as early-week price action has continued last week’s sell-off.

EUR/USD Daily Price Chart: Fresh Yearly Lows to Start the Week

eurusd eur/usd daily price chart

Chart prepared by James Stanley

Euro Data, US and UK CPI, Powell Speeches Highlight This Week’s Calendar

Outside of tomorrow’s budget items around Italy, the economic calendar has a number of potential drivers with the likely high-points being Euro items to go along with a couple of speeches with FOMC Chair, Jerome Powell. A couple of inflation prints remain of interest, as both the UK and US are due to report October inflation data on Wednesday morning.

DailyFX Economic Calendar: High-Impact Events, Week of November 12, 2018

DailyFX Economic Calendar High-Impact

Chart prepared by James Stanley

US Dollar to Fresh Yearly High After Last Week’s FOMC

It can often take a day or two to get the full-fledged response from a rate decision; and with some scope, that Thursday FOMC meeting has appeared to drive US Dollar strength to go along with some equity weakness.

The Dollar is charging-higher to start the week, and this comes after last week’s pullback to trend-line support on the chart. USD is now trading at fresh yearly highs to go along with those fresh yearly lows in EUR/USD. The next area of interest on DXY is at 97.87, as this is the 61.8% Fibonacci retracement from the 2017-2018 major move; and the 50% marker of that study helped to cap resistance for a portion of last month before USD buyers were finally able to leave it behind after a fourth attempt.

US Dollar Daily Price Chart

us dollar daily price chart usd

Chart prepared by James Stanley

With this move taking place on around a Monday open, traders would be rightfully cautious of chasing here. But, given recent dynamics, there are a couple of areas of interest for support potential, including that 97.00 level that had previously helped to offer resistance. A bit deeper, another level exists around 96.47, as this is the 23.6% Fibonacci retracement of the 2011-2017 major move.

US Dollar Four-Hour Price Chart

us dollar usd four hour price chart

Chart prepared by James Stanley

GBP/USD: Cable Gaps Down, and then Keeps Going

GBP/USD put in a gap upon this week’s open that, up to this point, remains unfilled. Sellers have continued to push through early-week price action, and GBP/USD has already taken-out the 1.2900 level while making a run at 1.2800. At this point, the pair looks oversold on a short-term basis and traders looking to on-load short-side positions may want to wait for a pullback. Given the unfilled gap with last week’s close taking place right at the 50% marker of the recent major move, the 1.2965 area would be a point-of-interest to follow for such a development.

GBP/USD Two-Hour Price Chart: Remaining Unfilled Gap for Resistance Potential

gbpusd gbp/usd two hour price chart

Chart prepared by James Stanley

Support Tests in AUD/USD, NZD/USD for USD Fades

On the other side of the US Dollar, NZD/USD and AUD/USD remain of interest, as each of these markets retain some element of a bullish quality despite the Dollar’s very noticeable top-side run. For traders looking to fade this recent run of US Dollar strength, those options would likely remain as a bit more attractive than looking for reversals of the pain seen in EUR/USD or GBP/USD.

AUD/USD Tests Confluent Support

In AUD/USD, a confluent area on the chart has already come into play to start the week, and this area runs between two longer-term Fibonacci levels around the .7200 level. Prices have, at this point, respected last week’s higher-low, keeping the door open for bullish strategies in the pair. Given this bullish indication seen on shorter-term charts, traders looking to trade reversals of this USD-strength would likely want to look in this direction as opposed to a pair that’s plunging down to fresh yearly lows.

AUD/USD Daily Price Chart: Holding Higher-Low Support Despite USD Breakout

audusd aud/usd daily price chart

Chart prepared by James Stanley

NZD/USD Tests .6725, Prior Resistance as New Potential Support

On a similar note, NZD/USD retains some bullish structure despite this continued breakout in the US Dollar. NZD/USD rose to a fresh three-month-high last week, catching a bit of resistance at the Fibonacci level at .6819. The pair pulled back after RBNZ and FOMC on Wednesday and Thursday, and to open this week, a level of note has already come into play. This takes place around .6725, with .6717 serving as the 61.8% retracement of the 2015-2017 major move, and had also helped to mark the late-August swing-high in the pair.

NZD/USD Eight-Hour Price Chart: Testing Higher-Low Support at Prior Resistance

nzdusd nzd/usd eight 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 Q4 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