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EURUSD Recovers ECB-Fueled Losses; USD Holds Support Ahead of FOMC

EURUSD Recovers ECB-Fueled Losses; USD Holds Support Ahead of FOMC

James Stanley, Senior Strategist

EURUSD, US Dollar Talking Points:

- The US Dollar has held Fibonacci support following a four-day draw-down that started after a test of a key resistance level. Last week’s NFP report assisted with the bearish move in the USD, and in-turn EURUSD has recovered the entirety of last week’s ECB-fueled losses. This sets the stage for next week’s FOMC rate decision on the calendar for Wednesday at 2PM ET.

- Also on next week’s economic calendar are rate decisions out of Switzerland and the UK, going along with inflation numbers out of Japan and Canada.

- 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 Holds Fibonacci Support: FOMC Up Next Week

The US Dollar has held support from 96.47 level that was tested on Wednesday of this week; and while buyers haven’t exactly come back with the same strength that was seen in early-March, it does set the stage for what could be a very interesting FOMC rate decision next week. And while there are minimal expectations for any adjustments to interest rates, what the bank says about the balance sheet could have a big pull on the bond market which could, in-turn, impact the global risk trade.

Also on next week’s calendar: UK inflation is released on Wednesday morning and both the Bank of England and the Swiss National Bank host rate decisions on Thursday morning. Japanese and Canadian inflation numbers are released to close out the week, making for a rather back-loaded calendar for next week.

DailyFX Economic Calendar: High-Impact Events for the Week of March 18, 2019

DailyFX Economic Calendar High-Impact Week of March 18, 2019

Chart prepared by James Stanley

US Dollar: Longer-Term Ascending Triangle, Short-Term Lower-Lows, Highs

This was looked at in yesterday’s webinar as there’s a case to be made for either direction in the US Dollar. The Greenback ran into a big resistance level last Thursday at 97.71, which is the yearly high in the currency. This is the same price that turned-around bullish advances in both November and December; and when buyers tested it again last week, prices began to fall and didn’t really stop until Wednesday, when the Fibonacci support level mentioned above came into play. This theme did get an assist from last week’s NFP report, which showed an abysmal headline number along with very strong wage growth. While this appears to be a fairly clear-cut bearish response in the currency to that report, the headline number may signal a tighter labor market, particularly when taken with that wage growth; and this may compel the Fed to be a bit more hawkish than what many were initially expecting after that release.

The US Dollar has shown back-and-forth price action over the past few months, with that 97.71 level helping to hold the highs while buyers have been getting a bit more aggressive. This has led into a longer-term ascending triangle pattern, which will often be approached in a bullish manner, looking for the motivation that’s driven buyers-in at higher-lows to, eventually, take out that horizontal resistance. Might the FOMC rate decision next week be that catalyst? Or will this theme need an assist from the Euro-Zone and a down-side break in EURUSD?

US Dollar Weekly Price Chart

us dollar usd weekly price chart

Chart prepared by James Stanley

On a shorter-term basis, bears have remained fairly-consistent since that resistance came into play last week. Prices have thus far held support at 96.47, but bulls have yet to take out the prior lower-high, keeping the door open for short-term bearish strategies. Deeper support potential around 96.30 and then around 96.00.

US Dollar Four-Hour Price Chart

us dollar usd four hour price chart

Chart prepared by James Stanley

EURUSD: A Week After ECB, Not So Weak

Last week’s ECB rate decision saw the bank announce a fresh round of TLTRO’s just months after making the announcement that they were exiting stimulus. This provoked a quick and impulsive short-side move in EURUSD that brought upon a temporary breach of support in a range that had been running for four months.

But buyers showed-up just below 1.1200, with support cauterizing around the 61.8% Fibonacci retracement of the 2017-2018 bullish move in the pair. Since then, EURUSD has been on a consistent track-higher, holding a bullish trend-line as prices passed back-above the 1.1300-handle. At this stage, the pair has recovered the entirety of those ECB-fueled losses.

EURUSD Two-Hour Price Chart

eurusd eur/usd two hour price chart

Chart prepared by James Stanley

Similar to the US Dollar above, the longer-term setup appears markedly different, as months of back-and-forth price action may open the door to bigger-picture breakdown potential. A bearish trend-line connecting the September and January swing-highs sits atop price action, and this can keep interest on short-side potential in the pair; and a breach of support can open the door to down-side targets at 1.1000 and a zone around 1.0850.

EURUSD Daily Price Chart

eurusd eur/usd daily 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 an abundance 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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