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US Dollar Re-Tests Fib Support; Gold Threatens Breakout Ahead of FOMC

US Dollar Re-Tests Fib Support; Gold Threatens Breakout Ahead of FOMC

2019-03-18 14:00:00
James Stanley, Currency Strategist
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US Dollar, Gold Talking Points:

- The US Dollar continues to retreat following the March Non-Farm Payrolls report. Just ahead of that release, a big level of resistance came into play for the US Dollar at 97.71; and since that price was tested an aggressive bearish theme has built in the Greenback. Last week saw prices drop down for a test of a key Fibonacci support level, but that price has thus far been unable to hold the lows as prices continue to peel back.

- EURUSD is continuing with a rather impressive bounce following the short-side move on the heels of the ECB rate decision. Prices are testing above 1.1350, keeping the door open for a re-test of early-March resistance around the 1.1400-handle. Despite the US Dollar’s general tone of weakness, USDJPY remains elevated, illustrating how the Japanese Yen has been even weaker than the US Dollar during this period, making for interesting cases around bullish themes in pairs like EURJPY and GBPJPY. Meanwhile, USD-weakness has allowed Gold prices to re-test a key zone of resistance; and if prices do break-out, there may be bullish scenarios to work with in Gold prices around this week’s FOMC rate decision.

- 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 Tests Below Support Ahead of FOMC Week

The big item on this week’s economic calendar is the Wednesday rate decision at the Federal Reserve, but that’s not the only release of importance on the docket ahead: Central Banks in the UK and Switzerland speak to markets for their respective rate decisions on Thursday, and on the data-front, inflation figures are set to be released out of the UK, Japan and Canada.

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

DailyFX Economic Calendar High Impact

Chart prepared by James Stanley

US Dollar Re-Tests Key Fibonacci Support at 96.47

The week-long drop in the US Dollar has continued as the currency maintains a pullback below an aggressively sloped trend-line. This pullback began after a big level of resistance came into play just ahead of the March Non-Farm Payrolls report. That level is at 97.71, and this is the same price that had turned-around bullish advances in both November and December of last year, marking the one-year-high in the currency.

The pace with which prices have moved down has thus far been impressive; and there are a couple of areas of interest for support just below current prices, around 96.30 and again around 96.03.

US Dollar Two-Hour Price Chart

us dollar usd two hour price chart

Chart prepared by James Stanley

On a longer-term basis, the big question is whether a bigger-picture bullish response might show at one of these deeper support levels; keeping in order the bullish trend-line that connects last September’s lows to this January’s swing-lows, making for an ascending triangle formation. Such formations will often be approached in a bullish manner with the anticipation that the enthusiasm that’s brought bulls in at higher-lows will, eventually, carry over to allow for a topside drive through horizontal resistance. With prices heading-lower, the big question is where or when that support might show.

US Dollar Weekly Price Chart

us dollar usd weekly price chart

Chart prepared by James Stanley

EURUSD Rally Continues Despite Friday Shake

Helping with that short-side move in USD is a continued bullish push in EURUSD. As looked at on Friday, that bullish trend began to pull back to the 1.1300 area; but buyers were sitting on the bid and prices soon pushed-higher. That strength has continued into this week and prices are now testing above the 1.1350-area, keeping the door open for a move back to longer-term resistance around 1.1448-1.1500.

Before that comes into play, however, the 1.1400-zone may elicit some turbulence. This is where prices caught resistance in late-February and early-March, just ahead of the ECB’s announcement of another round of TLTRO’s; which helped to bring a brief breach of support. The NFP report issued the day after helped to bring the US Dollar back down from that big resistance level which allowed for EURUSD to rise back above 1.1200 and then 1.1250.

EURUSD Four-Hour Price Chart

eurusd eur/usd four hour price chart

Chart prepared by James Stanley

Yen Weakness Remains A Dominant Theme

For investors or traders with bullish outlooks on currencies such as the Euro, Pound or even the US Dollar, one currency has stood out for its recent penchant for weakness; allowing for a weak counter-part to mesh up with a potentially strong currency. All of EURJPY, GBPJPY and USDJPY remain with bullish themes; and there was no sign of abandonment of that theme through last week’s Bank of Japan rate decision.

The bullish side of USDJPY has been one of the bullish-USD setups looked at over the past month in FX Setups of the Week; and the pair is currently staring down the 112-handle that brought in resistance earlier in the month. A topside break through 112.00 brings another potential resistance level into the equation at 112.34. This is the 76.4% Fibonacci retracement of the November, 2017- March, 2018 major move. This is the same price that helped to set support in November and December, just before the pair began to break-down ahead of the 2019 open.

USDJPY Daily Price Chart

usdjpy usd/jpy daily price chart

Chart prepared by James Stanley

Gold Moves Back into Resistance Zone

Going along with that continuation of USD-weakness, Gold prices have made a trip back into a key resistance zone while also challenging a bearish trend-line that’s been in-play since before the March open. This comes after last Thursday’s hold of support to create a higher-low, and buyers have remained active since this week’s open. Last week’s swing-high came-in off the 50% marker of the January-February bullish move. A topside break through that price would create a fresh March high, while opening the door for a test of the $1320 area on the chart, which is a confluent area with the 14.4% retracement of the August-February move along with the 61.8% Fibonacci retracement of the January-February trend.

Gold Four-Hour Price Chart

gold price 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 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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