US Dollar Pulls Back to Start a Busy Week; EUR/USD in Focus
US Dollar Pulls Back to Start a Busy Week; EUR/USD in Focus
US Dollar Talking Points:
- The US Dollar caught another bounce in the latter-portion of last week from the bullish trend-line that connects the September and October lows in the currency. This pushed DXY up to the 97.00 level, which held as resistance as we opened into a fresh week. But, going along with this weekly open has been a pullback from that 97.00 level, and the Dollar continues to push-lower as the US equity open nears.
- Is this the week that the US Dollar breaks-below the two-month trend-line? Support has seen an increased frequency of tests following last week’s dip down to 96.00, and given a thaw in the situation around the Italian budget, there may be more scope for EUR/USD gains which could bring further bearish price action to the US Dollar.
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US Dollar Holds Resistance at 97.00 After Late-Week Trend-Line Bounce
The US Dollar is softening off of resistance to start the week, and this comes after last week saw another bounce around the bullish trend-line connecting the September and October lows in the currency. This leads in to a rather busy calendar with a number of USD-related items on the docket for this week, and the Greenback will likely remain in-focus as bulls appear to be losing a bit of momentum after the early-month ramp up to fresh yearly highs.
US Dollar Four-Hour Price Chart: Trend-Line Bounce into 97.00 Resistance
This week’s economic calendar has high-impact releases for every day of this week. German unemployment and Euro-Zone CPI are released on Thursday and Friday, and this will likely garner considerable attention around the Euro. Out of the US, there are high-impact items on Tuesday, Wednesday and Thursday, and this includes a speech from FOMC Chair Jerome Powell on Wednesday to go along with the release of FOMC meeting minutes the day after. This will likely receive considerable focus given the state of risk markets, and the recent responsiveness seen with FOMC commentary. The most recent FOMC meeting earlier this month seemed to mark the short-term top in US equities, as American stock markets have been in a state of distress since that rate decision a few weeks ago.
DailyFX Economic Calendar: High-Impact Items for the Week of November 26, 2018
US Equity Futures Bounce Ahead of US Open
It’s been a rough past three weeks of price action in US equity markets, and this theme appears to have some correlation with the recent FOMC meeting, as the November high in both the Dow and the S&P 500 was set just ahead of that rate decision; and there has been a clear change in tonality ever since. With some Fed-speak on the calendar for this week to go along with a number of data releases, the potential exists for some reversion in this theme.
At this point, the big question is just how aggressive bears might be as prices have moved closer to the October lows. With that Powell speech on Wednesday, and with the head of the FOMC already acknowledging a slowdown in global growth and a bit of concern around the equity sell-off from October, we may see a bit of anticipation ahead of the event. If support holds going into Wednesday and if Powell offers anything on the dovish side of the equation, we could see strength flow back into equities. At this point, traders would likely want to remain cautious and at best, cautiously optimistic of this potential outcome.
S&P 500 Daily Price Chart: Buyers Holding Support Above October Lows
Euro Pulls Back After Friday’s Bearish Break
The early portion of last week saw EUR/USD continue to climb along a short-term bullish trend-line. Prices made it all the way back to the 1.1400 handle through the US holiday; but as Friday price action began the single currency started to drop. In EUR/USD, this amounted to a run down to 1.1325, and this held into the weekly open before buyers posed a topside push.
EUR/USD Four-Hour Price Chart
At this stage, a bit of support is showing off of the prior support/resistance level at 1.1355. This had offered a bit of resistance last Friday and this comes after a support bounce earlier in the week. This may be showing a deeper bullish move before the bigger-picture bearish trend might be ready for resumption. The door for further bullish continuation may be opening as the Italian government backs down from their position on the budget, decreasing deficit targets as directed by Brussels.
EUR/USD Hourly 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.
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--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX