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EURUSD, GBPUSD, USD Talking Points:

  • The post-FOMC backdrop has been busy as reverberations continued to show through Asian and European session opens following yesterday’s Federal Reserve rate decision.
  • Risk assets are flying-high and the US Dollar is dropping back towards a key area of support. EUR/USD is making a strong topside push despite the earlier-week dovish commentary from Mario Draghi, while GBPUSD has run into a key area of resistance following a dovish Bank of England rate meeting.

Post-FOMC Reverberations Bring EURUSD Pop, GBPUSD Resistance Test

It’s been a busy past 18 hours after the June rate decision at the FOMC. The bank forecast an expectation for rate cuts later this year and in response the US Dollar continued its drop from the 97.70 level that came into play earlier this week. Perhaps more noticeable, markets like EUR/USD and GBP/USD caught a bid, helping to break prior themes if weakness in each respective market. And both stocks and Gold have run wild this morning, with Gold prices making a strong leap up towards the 1400 psychological level in the process of setting a fresh five-year-high.

The natural question after an event of this nature is continuation potential; and considering that we’re still sitting very close to that recent driver, it makes sense to look for a bit of additional confirmation before shifting strategies in a singular direction. But, as looked at two weeks ago, the US Dollar may have scope for extended downside, particularly if the 96.47 level that helped to set support in early-June might be taken-out.

USD had come into Q2 in an ascending triangle formation, which will often be approached with the aim of bullish breakouts. And that breakout happened, kind of, in both April and May as buyers pushed beyond the prior triple-top at 97.70 and created a fresh high at 98.33. But, that’s where the proverbial music stopped; and upon a second test of that same level a month later, sellers came into play, after which a series of lower-lows and lower-highs developed. It was the 96.47 level that halted that decline; and this showed up at a confluent area on the chart as there is all of a Fibonacci level, the 200-day moving average and trend-line support in very close proximity.

US Dollar Daily Price Chart

us dollar usd daily price chart

Chart prepared by James Stanley

The failure from bulls to breakthrough to fresh highs in May built-in a rising wedge pattern; and this is a formation that will often be approached with the opposite aim of the ascending triangle looked at above. Traders will often treat such a backdrop with the aim of bearish reversals, looking to capitalize on the waning enthusiasm displayed near resistance from bulls to, eventually, play through for a break of support and the initiation of a bearish trend. Price action in the US Dollar is now testing through the bottom of that formation, and the 96.47 level lurks below. A breach-below that opens the door for a re-test of 96.03, 95.68 and then the 95.00 psychological level.

US Dollar Weekly Price Chart

us dollar usd weekly price chart

Chart prepared by James Stanley

EUR/USD Pops as the US Dollar Drops, Off-Setting Dovish Draghi’s Prior Speech

EUR/USD put in a drop earlier this week on the heels of some dovish comments from ECB President, Mario Draghi. And that move helped prices in the pair to push down to another Fibonacci level at 1.1187. But, as USD-weakness began to take-over, bulls came back into the picture to elicit a firm run up to fresh weekly highs. The 1.1350 level that bulls seemed so reticent to test earlier this month is fast-approaching, and if this theme can continue to drive the door is opened for a test of the 1.1400 handle before the longer-term area of prior resistance comes into play from 1.1448-1.1500.

EURUSD Daily Price Chart

eurusd eur/usd daily price chart

Chart prepared by James Stanley

GBPUSD Runs into Resistance

I had looked into this one during the Tuesday webinar, sharing how a pullback to resistance could re-open the door for short-side scenarios. That setup, however, would require a continuation of short-term strength after a key level of support had come into play; and yesterday’s FOMC rate decision may have been that catalyst.

In contrast to what’s showing above in EURUSD, the bounce in Cable has been more muted. A bounce has developed, and prices have run into resistance at a prior zone of support. This runs from 1.2671-1.2721 and contains the 2705 Fibonacci level in-between. This morning brought another rate decision with some dovish leanings when the Bank of England hosted their rate decision. This was to far less fanfare, however, than yesterday’s FOMC rate decision and this dovish twist is far less of a change-of-pace than what was seen from the Fed.

GBPUSD has since held that resistance, and for traders looking to fade this recent run of USD-weakness, the short-side of GBPUSD can remain of interest.

GBPUSD Daily Price Chart

gbpusd gbp/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 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