US Dollar Talking Points:
- The next two days are big as a chorus of Fed speakers are set to offer commentary from the Jackson Hole Economic Symposium. The big item of focus is FOMC Chair Jerome Powell’s scheduled speech on the economic calendar for 10AM ET but, as is usual, any of these Fed speeches can prove market moving given the heavy importance of FOMC policy at the moment.
- Not to be forgotten, political risks are rising again in Italy. The Euro remains in a short-term range but, should USD-strength show as a result of the next two days’ worth of drivers, the bearish theme in EUR/USD may soon be back in play.
- DailyFX Forecasts are published on a variety of markets such as Gold, the US Dollar or the Euro and 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.
US Dollar Bounces on FOMC Minutes, Awaits Fed-Speak
The US Dollar has pushed right back up to this week’s resistance following the release of yesterday’s FOMC minutes. While it certainly appeared as though those meeting minutes to bring some bearish potential, that didn’t come to pass as the bank was widely looking at last month’s rate cut as a ‘mid cycle adjustment.’ There wasn’t much for assurances of future rate cuts and in response the US Dollar put in a quick bounce from the 98.00 level to push back up to resistance around the 98.37 zone.
While the move was very visible, it’s also thus far been fairly mild, indicating that a large amount of focus is awaiting on the chorus of Fed speakers set to take the stage over the next two days. FOMC Chair Jerome Powell’s speech at Jackson Hole tomorrow will be particularly interesting, and it appears that Chair Powell has a tightrope to walk, keeping the door open to rate cuts and further softening while also not setting off alarms about any possible impending recessionary signals. After the recent thickening of drama around yield curve inversion in US Treasuries, global markets are rightfully cautious, particularly when the entire German yield curve has now moved into negative territory. Distortions abound and, at this point, we’re not entirely certain of how the Fed is going to handle policy moving forward. The next two days of hints and speeches will be key in trader’s pricing in that next direction.
US Dollar Four-Hour Price Chart
Chart prepared by James Stanley; US Dollar on Tradingview
Is the Euro Nearing a Bearish Breakout?
With the Fed seemingly avoiding the topic of future softening so far and with the wide expectation for Powell to straddle the line in tomorrow’s speech, sellers have started to re-test near-term lows in EUR/USD. If we do, in fact, get a net result of USD-strength on a lack of a rate cut pledge, there could be downside potential in the single currency. The psychological level of 1.1000 lurks just below and hasn’t been traded at in two years.
There’s a potent cocktail of negative news around the Euro, with last week’s announcement of potential stimulus out of the ECB to go along with the Italian political conundrum. To date, sellers haven’t been able to break fresh ground over the past week prices have built into a range. But, given the events on the calendar for the next couple of days, that potential certainly does exist.
EUR/USD Four-Hour Price Chart
Chart prepared by James Stanley; EURUSD on Tradingview
GBP/USD Grasps to Trendline Support, Builds Bear Flag
August has, so far, seen the brutal bearish trend in GBP/USD slow down a bit. Price action in the pair ran into a long-term trendline earlier this month and since, bears haven’t been able to break much fresh ground.
GBP/USD Monthly Price Chart
Chart prepared by James Stanley; GBPUSD on Tradingview
The continued jockeying at support has led to the build of a bear flag formation, which can help to keep the door open to short-side strategies on the pair, particularly for those looking for a net move of USD-strength around the Jackson Hole driver.
GBP/USD Four-Hour Price Chart
Chart prepared by James Stanley; GBPUSD on Tradingview
USD/CAD Tests Support, Avoids Breakdown
Perhaps lost in the shuffle was yesterday’s Canadian inflation print, which came out at a surprisingly strong 2% versus an expectation for 1.7%. The immediate response in USD/CAD was a push down to the 1.3250 psychological level, which helped to hold support; but sellers were unable to keep control. Prices have since reverted back to prior trend-line support.
As looked at in Tuesday’s webinar, USD/CAD carries reversal potential. The pair was in a hard bearish trend in June and early-July, reversing after sellers failed to re-test the 1.3000 handle. That’s led into a month-long retracement with prices pushing to as high as 1.3345. If we do see a break of that 1.3250 level, the door is open for a re-test of 1.3200, 1.3132-1.3150 and then 1.3066.
USD/CAD Four-Hour Price Chart
Chart prepared by James Stanley; USDCAD on Tradingview
AUD/USD: Sellers Shy Away from Key Support
Similar to GBP/USD above, a long-term level has come into play that’s further restrained the near-term theme. AUD/USD has been in a hard bearish trend since the beginning of last year. Opening 2019, the pair ‘flash crashed’ down until the .6750 level came into play, which has set beneath price action for the rest of the year’s trade like a beacon in the mist. That price started to get tested again for support in early-August, eventually giving way temporarily during a quick burst of USD-strength.
AUD/USD Monthly Price Chart
Chart prepared by James Stanley; AUDUSD on Tradingview
But that’s the point where sellers dried up and prices began to move-higher. Since then, we’ve seen a re-emergence of that price as support and sellers have been unable to leave it behind. That build of support at a key level can keep the door open for bullish scenarios on the pair, particularly for those looking at ways of getting short in the US Dollar.
AUD/USD Two-Hour Price Chart
Chart prepared by James Stanley; AUDUSD on Tradingview
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
