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US Dollar Price Outlook: EUR/USD, GBP/USD, USD/CAD, AUD/USD

US Dollar Price Outlook: EUR/USD, GBP/USD, USD/CAD, AUD/USD

2019-09-18 12:33:00
James Stanley, Currency Strategist
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US Dollar Talking Points:

  • Today at 2PM ET brings the FOMC rate decision for the month of September.
  • A rate cut has long been expected at this meeting but, of recent, expectations for that cut have softened, posing a roughly 50/50 expectation for a 25 basis point cut later today. Perhaps more important will be the bank’s outlook for policy in the remainder of the year and 2020.
  • 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 Builds Range Ahead of the FOMC

Fed day is here, and at 2PM ET this afternoon the FOMC is widely-expected to cut rates for the second time this year following nine rate hikes in the previous four years. While Jerome Powell framed the July rate cut as a ‘mid cycle adjustment’ markets were clearly unnerved by the Fed Chair shrugging off global pressures. It was less than 24 hours after that rate decision that the volume got turned up in the ongoing US-China trade war and in fast order risk markets turned-lower. In response, expectations for rate cuts amped up and for a while, there was even a realistic shot at a 50 basis point cut at today’s FOMC rate decision.

This expectation for the Fed to meet pressure head-on with looser policy helped to arrest those equity declines, and stocks soon shot back up towards prior highs. And as US data has come-in not so badly of recent, along with stocks remaining stable near highs, expectations for Fed softening have diminished, with today currently showing at roughly 50/50 as to whether the bank cuts.

Expectations for FOMC at Today’s Rate Decision (per CME Fedwatch)

FOMC Rate Expectations

Chart prepared by James Stanley; data from CME Fedwatch

US Dollar Builds Range Ahead of FOMC

After a flare of strength coming into the month, the US Dollar has pulled back and built into a range over the past two weeks, with current price action sticking within a longer-term resistance zone in the middle of that near-term range. This doesn’t really offer much of a directional bent, however, the short-term range can be used to set-up longer-term operations, looking for a break of support to open the door for short-side strategies and a piercing of resistance to open the door for bullish scenarios.

US Dollar Four-Hour Price Chart: At Home on the Range, for Now

us dollar four hour price chart

Chart prepared by James Stanley; US Dollar on Tradingview

EUR/USD: Snap Back After ECB

Well, the ECB announced the significant QE package that Olli Rehn had previously hinted at. And the single currency did dive, although the move was temporary and price action quickly snapped back. EUR/USD is currently trading right around the same level that it was at ahead of that ECB meeting and similar to the US Dollar above, there isn’t really an attractive short-term theme to work with.

EUR/USD Eight-Hour Price Chart

eurusd eur/usd eight hour price chart

Chart prepared by James Stanley; EURUSD on Tradingview

GBP/USD Pulls Back from Fresh Monthly High

In contrast, Sterling has posed a strong bullish trend so far in September despite a backdrop of seemingly negative fundamentals and a large dose of uncertainty remaining around Brexit. A long-term trend-line came into play in early-August, and GBP/USD spent most of the month struggling to hold ground. Last month closed as a doji and, so far this month, prices have continued higher, building in a potential morning star formation (needing a monthly close to confirm the formation).

GBP/USD Monthly Price Chart

gbpusd monthly price chart

Chart prepared by James Stanley; GBPUSD on Tradingview

As looked at in yesterday’s webinar, short-term price action in the pair has encroached upon a big level around the 1.2500 handle. This has brought a bit of a pullback after price action punched up to fresh monthly highs yesterday following a support check at a key zone on Monday. This keeps the pair in a bullish position and this would likely remain as one of the more attractive ways to look for USD-weakness around today’s rate decision.

GBP/USD Four-Hour Price Chart

gbpusd four hour price chart

Chart prepared by James Stanley; GBPUSD on Tradingview

USD/CAD Holds in Resistance Zone, Awaits the FOMC

USD/CAD appears to be awaiting the Fed for that next directional push. The pair put in a reversal earlier this month after testing a key zone of resistance. That move played out for a 200+ pip sell-off, with price action testing a key zone of support around 1.3132. But – since that support came into play last week, prices have bounced higher and begun to re-test a prior zone of support that held the lows for three months earlier this year. This zone runs from 1.3250-1.3300 and, so far, buyers have been stymied since last Friday in this area.

Given proximity to that resistance that runs from 1.3361-1.3385, topside scenarios in USD/CAD could be a touch less attractive here given target potential. The short side of the move could remain as attractive should USD-weakness show after today’s rate meeting, looking for re-tests of 1.3200, 1.3132 and, perhaps even, a test of the vaulted psychological level at 1.3000.

USD/CAD Four-Hour Price Chart

usdcad four hour price chart

Chart prepared by James Stanley; USDCAD on Tradingview

AUD/USD Turns from Resistance – Can Sellers Make Another Push

Aussie has had a brutal 2019 so far, starting the year with a flash crash and trading on its back foot for much of the period since. July and August were particularly painful as AUD/USD pushed all the way down to fresh ten-year-lows, eventually digging-in support around the .6700 handle.

Early-September brought a retracement and price action soon started to re-test a key zone on the chart that runs from .6862-.6837. That zone has since come-in to help hold the highs, and this week has seen sellers tip-toe down to a fresh lower-low after last weeks hold at resistance. This can keep the door open for short-side strategies in the pair, making this as one of the more attractive long-USD candidates ahead of today’s FOMC rate decision.

AUD/USD Two-Hour Price Chart

audusd 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

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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