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US Dollar Pulls Back from Fresh 2019 High as EUR/USD Tests Resistance

US Dollar Pulls Back from Fresh 2019 High as EUR/USD Tests Resistance

James Stanley, Senior Strategist

US Dollar, EUR/USD, USD/JPY Talking Points:

- The US Dollar is pulling back from fresh 2019 highs set in the overnight session. DXY crossed above the 97.00-level on the chart to continue the post-FOMC bullish run that started shortly after the January rate decision. A number of drivers are on the calendar in the coming days, with a number of FOMC speakers on the calendar to go along with CPI (Wednesday), Advance Retail Sales (Thursday) and U. of Mich Sentiment (Friday).

- Going along with that run of USD strength has been a test of longer-term support in EUR/USD, a topside breakout to fresh highs in USD/JPY and an item of interest in USD/CAD that could be interesting for those looking at short-USD themes. Each of these themes are discussed below.

- DailyFX Forecasts are published on a variety of currencies such as the US Dollar or the Euroand 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 Pulls Back from Fresh 2019 Highs

The bullish run in the US Dollar continued through yesterday’s trade, and DXY hit a fresh 2019 high at 97.20 in the overnight session. Since then, a bit of a pullback has developed as that topside run has softened and prices are now testing below the 97.00-level on the chart. The big question here is how aggressive might bulls be? Prices in the currency have been rallying since the late-January FOMC rate decision; and while the bank doesn’t exactly look to be in a hawkish position, the US Dollar has become somewhat of the ‘least negative’ of major currencies; with weakness in the Euro and Japanese Yen both assisting with this topside push in the recent theme of US Dollar strength.

US Dollar Two-Hour Price Chart

us dollar usd two hour price chart

Chart prepared by James Stanley

Plentiful USD Drivers on the Horizon

On the driver side of the matter, the economic calendar for the rest of this week brings quite a few items. On the data-front, tomorrow brings CPI, Thursday brings Advanced Retail Sales and Friday brings the U. of Mich Consumer Sentiment reading. Between these releases are a number of FOMC speakers on the calendar in the coming days, shown below with times in Eastern. Later today brings Chair Powell, Loretta Mester speaks on the economic outlook and monetary policy later this evening; and Esther George talks about the US economy at 7:30 PM tonight.

FOMC Speakers for the Week of February 12, 2019

FOMC Speakers on the Calendar Week of Feb 11, 2019

Chart prepared by James Stanley

EUR/USD Pulls Back After Test of Long-Term Support

As discussed yesterday, the downside run in EUR/USD began to test support in a long-term zone. The pair has been range-bound since early-November and this range has held through a variety of issues, including when the European Commission rejected the Italian budget in Q4 of last year. And even as the page turned into February, the potential for strength remained as EUR/USD was testing the resistance side of the range.

But over the past two weeks sellers have taken-control, and prices have sold-off in a consistent fashion as a quick drop developed that ran from resistance down to support.

EUR/USD Daily Price Chart

eurusd eur/usd daily price chart

Chart prepared by James Stanley

At this point, EUR/USD is catching a bit of a bounce after setting a fresh 2019 low; and prices are moving back towards the prior support area of 1.1300. Sellers are currently showing a bit of a reaction to a trend-line test; but given how oversold the pair had become in the midst of that bearish run, there may be scope for a deeper pullback before the longer-term bearish move is ready to continue.

EUR/USD Four-Hour Price Chart

eurusd eur/usd four hour price chart

Chart prepared by James Stanley

USDJPY Breakout Pulls Back

USDJPY had set that fresh 2019 high yesterday as the pair broke out of a key area of resistance shortly after the open of this week’s trade. That theme ran up to a fresh high last night at 110.65, and similar to the US Dollar chart looked at above, a bit of a pullback has developed since.

The big question here is whether buyers return to show support around prior resistance. As looked at in this week’s FX Setups, that prior zone of resistance held numerous topside tests until this week finally saw bulls breakout to fresh highs. But the zone from 109.67-110.00 remains of note, as support showing in this area can keep the door open for bullish strategies, targeting potential resistance around 110.86, 111.40 and/or 112.33.

USD/JPY Four-Hour Price Chart

usdjpy usd/jpy four hour price chart

Chart prepared by James Stanley

USD/CAD Holds Lower-High, Downside in Focus?

On the other side of the US Dollar or for those looking for weakness in the US currency, USDCAD remains of interest. The pair put in a strong bullish move after bouncing from the Fibonacci level around 1.3066 earlier this month. That move remained very visible into last Friday’s data, at which point a strong Canadian employment report brought a quick dose of strength back into the Canadian currency, helping USD/CAD soften down to a key support zone that runs from 1.3236-1.3259. That area continues to help hold the lows, but the item of note is what happened between last Friday’s run and now, which was a lower-high inside of last week’s swing around 1.3325. This could keep the pair as an option for USD-weakness strategies as a bevy of data and drivers is encountered for the US currency in the coming days.

USDCAD Four-Hour Price Chart

US Dollar Pulls Back from Fresh 2019 High as EUR/USD Tests Resistance

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

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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