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Gold, US Dollar Talking Points:

- The US Dollar has continued its post-NFP descent, following a failed test at resistance around yearly-highs earlier this month. This has helped EURUSD to firm while Gold prices are nearing a breakout to fresh March highs.

- Tomorrow’s economic calendar brings the FOMC with the bank’s March rate decision. There are minimal expectations for anything new, but the bank’s take on the balance sheet could be a key driver of the risk trade, which could compel volatility in the USD, Treasuries, US Equities and Commodities like Gold.

- 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.

Good News, Bad News Out of Germany

There’s been a bit of good news and a bit of bad news out of Germany this morning. Bad news first: A group of German economists, dubbed the ‘wise men’ (which actually consists of four men and one woman) have cut growth forecasts for Europe’s largest economy for 2019. While previously expecting growth of 1.5%, they’re now looking for growth of .8% this year, citing slower exports as the main driver and the potential for a chaotic Brexit as an additional risk to the outlook. Now for the good news: Sentiment in Germany isn’t as bad as it was expected to be. In this morning’s release of the Zew survey out of Germany, economic sentiment improved more than expected, printing at -3.6 versus the -13.4 from last month and the expectation for -11.

The net response so far in the Euro has been a mild move higher as prices remain around the 1.1350 area on the chart; begging the question as to whether or not the bullish move that sparked around the March NFP report is in the process of stalling-out. This area of current resistance connects to prior support that came into play in late-February.

EURUSD Eight-Hour Price Chart

eurusd eur/usd eight hour price chart

Chart prepared by James Stanley

US Dollar Primed for FOMC

The US Dollar drop has continued down to the next level of support around 96.30, which is helping to hold the lows for this morning. But – the aggressively-sloped bearish trend-line looked at yesterday remains in-charge, catching another inflection around yesterday’s swing-highs.

US Dollar Two-Hour Price Chart

us dollar usd two hour price chart

Chart prepared by James Stanley

Tomorrow brings the FOMC rate decision for the month of March. There’s little expectation for any hikes or commitments to as such; and the focus will likely revolve around what the bank plans to do with the balance sheet and what the final composition of bonds in the FOMC’s portfolio might look like.

In the US Dollar, the short-term bearish theme runs counter to a longer-term build of a potentially bullish formation. On a longer-term basis, DXY has built-in an ascending triangle formation, which will often be approached in a bullish manner, with the expectation that’s brought bulls in at higher-lows will, eventually, carry through to a break of horizontal resistance. The next level of support around 96.03 is key for this theme to remain alive, and a break-below 95.82 would give a fresh monthly low along with a test below the bullish trend-line, making the viability of the formation considerably less attractive.

US Dollar Daily Price Chart

us dollar usd daily price chart

Chart prepared by James Stanley

Gold Price Gains Towards Topside Breakout

For USD-weakness strategies around tomorrow’s FOMC, Gold remains an interesting market. Prices in the yellow metal put in a precipitous drop from mid-February into early-March trade, just as the US Dollar was spiking-higher. But the NFP report earlier in the month helped to push USD-lower, and as that short-term bearish theme has continued to build, strength has continued to show in Gold prices.

As looked at yesterday, Gold prices are nearing a key area of resistance around the March high, which lines up fairly well with a couple of different Fibonacci levels. The price of $1310.53 is the 76.4% retracement of the 2014-2015 sell-off in Gold. The price of $1311.38 is the 50% marker of the January-February bullish advance; and if price action can break above both of these levels, another confluent zone lurks around the $1319 area, which could be an interesting area to investigate for bullish breakout targets.

Gold Price Four-Hour Chart

gold price four hour chart

Chart prepared by James Stanley

USDJPY Trend-Line Test

For those that are looking at USD-strength strategies or ways of on-loading USD exposure ahead of tomorrow’s FOMC rate decision, USDJPY remains a compelling case. Despite the US Dollar’s setbacks over the past week, USDJPY remains with a fairly bullish backdrop, holding a trend-line that connects higher-lows that have been printing over the past month. Just below that is a key area of support around the Fibonacci level at 110.86, which helped to cauterize the March swing-lows a couple of weeks ago. A hold above this area keeps the door open for bullish continuation, targeting resistance at 112.00 and potential resistance at 112.34.

USDJPY Eight-Hour Price Chart

usdjpy usd/jpy eight hour price chart

Chart prepared by James Stanley

USDCNH Congests – Bearish Channel Remains In-Order

On the other side of the US Dollar, USDCNH has remained on a fairly consistent track over the past four months, and this comes in stark contrast to last year’s price action in the pair. USDCNH spent most of the period from April to November last year jumping-higher as the Yuan weakened considerably. But, given that this is linked to a managed-float exchange rate, the prospect of allowing the market to break out to fresh all-time-highs while trade wars were heavy in the headlines didn’t seem an opportune prospect, and in November I began looking for a reversal in the pair.

That theme has continued to play out as prices have continued to fall in the pair in 2019, allowing for the build of the bearish channel. For traders looking at strategies of weakness in the US Dollar, USDCNH can be a compelling case ahead of tomorrow’s FOMC rate decision, as looked at in this week’s FX Setups of the Week.

USDCNH Daily Price Chart

usdcnh usd/cnh 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