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US Dollar Price Action Setups in EUR/USD, USD/CAD and AUD/USD

US Dollar Price Action Setups in EUR/USD, USD/CAD and AUD/USD

James Stanley, Senior Strategist

US Dollar, EURUSD, USDCAD, AUDUSD Talking Points:

  • It’s been a busy week in the US Dollar as a sell-off on Monday and Tuesday finally found support on Wednesday. But, on the heels of this morning’s ECB rate decision, sellers have come back to push prices in DXY back-down to the 97.00 handle.
  • EURUSD has continued to march-higher while USDCAD has bounced from key support in the six-week-range. AUDUSD, on the other hand, has continued to show strength through the RBA’s rate cut to a record low 125 basis points earlier this week, keeping a series of options on either side of the Greenback ahead of tomorrow’s US and Canadian jobs number releases.
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US Dollar, Major FX Markets Moving to Start June Trade

It’s been a busy week so far, both in the headlines and on the charts. A number of technical themes remain of interest, and tomorrow brings a bit patch of potential volatility with the dual release of US and Canadian Jobs numbers at 8:30 AM ET. And while stocks have gotten back to their bullish ways on the heels of Chair Powell’s comments earlier this week, currencies remain on the move with a number of notable items, key of which has been a wild June open in the US Dollar that’s created setup potential across a host of major currency pairs. In this article, I’m going to focus in on three of the more popular majors of EURUSD, GBPUSD and USDCAD.

US Dollar Catches Support After Bottom Falls Out, But Can it Hold?

It’s been a generally strong start to the year for the US Dollar, and this comes despite the fact that the Fed has remained rather passive throughout. In March, the bank dropped their expectations for two rate hikes in 2019 and as the year has progressed, the dovish talk has grown louder out of the FOMC. This week saw confirmation of that on the Jerome Powell commentary earlier this week; and while Chair Powell didn’t appear ready to commit to future rate cuts, he did keep the door open to doing whatever needed to be done to keep American markets flowing. And this alludes to the same Fed put that’s been in-play in varying ways in the post-Financial Collapse backdrop: It hasn’t went away, it merely took a break as the FOMC looked to ‘normalize’ policy from 2016 to current day. But each time that normalization has become problematic, the Fed has backed off, looking to keep US equity markets from going into ‘bear market territory’.

This has had profound impact on near-term price action in the US Dollar. After coming very near a re-test of the two-year-high last Thursday, prices plunged-lower in the early part of this week, dropping down to a test of the April swing-low around 96.75. Yesterday finally saw some support show up and USD pushed back to a key area of resistance on the chart, taken from an area of confluence around the 97.32-97.34 area, and approximate 38.2% Fibonacci retracement of the past week’s sell-off. A bit-higher, another area of interest remains around 97.50, as this has the 50% marker of that recent major move along with a number of other items; making this a potential price area to look for lower-high resistance.

US Dollar Four-Hour Price Chart

us dollar usd four hour price chart

Chart prepared by James Stanley

EURUSD Catches Bid, Challenges Six-Week-Highs

Europe’s economy is not in a healthy state. That much is known and has been known for some time. Combine that with a political cocktail of risk and you have a potentially very dangerous situation but, again, this has been known for some time. This helps to explain why this morning’s dovish ECB rate decision was met with strength in the single currency. It’s not that investors are optimistic around Europe as much as the fact that this theme has been getting priced-in for quite some time. And as expectations around US rates have fallen dramatically of recent, that more powerful theme has taken over and USD-weakness has outmatched Euro-weakness, thereby allowing for a bullish move on the EURUSD chart.

Last week I had pointed out the potential for this scenario to be a brewing bear trap. Sellers have had months to push EURUSD down to the 1.1000 handle, and to date, have failed to do so. This alludes to the fact that there’s likely a lot of long-term shorts holding on here, looking for the move to continue; and this may require a pullback before the stage might finally be set for a greater breakdown. Prices pushing back, taking out trailed stops around prior swing-highs could help to reset sentiment in the pair, putting more investors and traders on the sidelines with the ability to come back in to hit the offer. The big question is for how long that theme might last, and at this point, the next area of potential resistance runs around the April highs in the 1.1325 area. If buyers are able to take that out, then range resistance from the six-month formation comes into play, and that runs from 1.1448-1.1500.

That retracement potential in the longer-term bearish move keeps the door open for plays on USD-weakness, looking for EURUSD to move up for tests of 1.1325 or, perhaps even as deep as 1.1448.

EURUSD Eight-Hour Price Chart

eurusd eur usd price chart

Chart prepared by James Stanley

USDCAD Holds Range Support Ahead of Canada, US Jobs Releases

Tomorrow at 8:30 AM ET should be especially pensive in USDCAD as jobs numbers are being released out of both economies at the same time. The USDCAD pair has been of particular interest lately as the dynamics in USD have played through fairly well.

Last Thursday, as the US Dollar was pushing up towards the two-year high, USDCAD was in the midst of its own bullish move following the BoC rate decision that took place the day prior. As looked at ahead of that meeting, bullish breakout potential opened the door for a re-test of the 1.3565 swing, and this came into play a week ago. But, after that, a far different story has taken-hold as USDCAD has pushed all the way to the other side of the range, eventually finding support yesterday at the Fibonacci level of 1.3361.

At this stage, support continues to hold the lows, and this keeps the door open for topside strategies for traders looking to fade this recent round of USD-weakness.

USDCAD Four-Hour Price Chart

usdcad usd cad price chart

Chart prepared by James Stanley

AUDUSD Bounces From May Lows – Bulls Coming Back?

Last month produced the first Monthly close below the .7000 level in AUDUSD since the recovery from the financial collapse in 2009. To be sure, a number of factors were getting priced-in during the month of May. The RBA’s widely expected interest rate cut took bearing, as did the brewing trade war between the US and China, to which the Australian economy is certainly exposed. But, as looked at a couple of weeks ago, selling pressure began to slow down around the .6750 level and, since then, the AUDUSD pair has put in a series of higher-highs and higher-lows.

That theme of strength continued to show through this week’s RBA rate decision that saw the bank cut rates to a record low of 125 basis points. Prices continued to rally all the way back-up to that .7000 big figure, at which point a bit of resistance began to set in. After an approximate 48 pip pullback, AUDUSD prices have found support at a prior swing around .6960, setting the stage for another re-test of the .7000-.7019 resistance area on the chart. A break-above can soon re-open the door to bullish strategies in the pair, looking for continued USD-weakness to help buoy the pair back-above the big figure on a longer-term basis.

AUDUSD Two-Hour Price Chart

audusd aud usd two 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 have a section for each major currency, and we also offer a plethora of resources on Gold or 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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