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US Dollar Technical Forecast: EUR/USD, AUD/USD, GBP/USD, USD/CAD

US Dollar Technical Forecast: EUR/USD, AUD/USD, GBP/USD, USD/CAD

James Stanley, Senior Strategist

US Dollar Talking Points:

US Dollar Holds Support After Q4 Pullback

It’s been a pullback type of start to Q4 so far for the US Dollar. The currency came into the fourth quarter with strength, setting a fresh two-year-high last Tuesday. But another disappointing manufacturing ISM report led into a pullback and that hastened on Thursday with a miss on the services portion of the ISM report. Friday’s Non-Farm Payrolls did little to help, as well, as a 0% read in Average Hourly Earnings highlights lagging wage growth; and at this point, buyers remain on the sidelines for the US currency as a number of themes remain in the headlines. Of issue is the October rate decision at the Fed. The bank hasn’t yet talked up another rate cut but markets are highly-expecting one, with a current probability of 78.6% for another 25 basis points of softening when the Fed meets in a few weeks.

In the US Dollar, prices are clinging to support that came into play last Thursday after the disappointing services ISM report. This rings in around a prior area of resistance at around 98.75 in DXY.

US Dollar Two-Hour Price Chart

us dollar two hour price chart

Chart prepared by James Stanley; US Dollar on Tradingview

Taking a step back to look at the bigger-picture, and the big question is whether a larger reversal is waiting in the wings. Prices came into Q4 in the rising wedge formation that’s built through 2019 price action. And given the continued show of trepidation from bulls at-or-around highs it makes sense as to why this formation has built. Such a pattern will often be approached for bearish reversal potential and this is something that can remain of interest in the coming weeks as FOMC policy comes further in the spotlight. This was the approach looked at in the Q4 technical forecast on the US Dollar.

US Dollar Weekly Price Chart

us dollar weekly price chart

Chart prepared by James Stanley; US Dollar on Tradingview

EUR/USD: Key to US Dollar Dynamics

One of the primary push points of the above scenario is what takes place in EUR/USD and given the 57.6% weighting in DXY of EUR/USD, that makes sense. EUR/USD prices have been stubborn so far this year, presenting a series of bear traps. The pair did finally break down to a fresh two-year-low last week as USD strength was showing prominently into the Q4 open; but EUR/USD price action has since pulled back to resistance at the 1.1000 handle and that’s held for the past few days.

For traders that do want to look for USD-strength, this remains a compelling setup.

EUR/USD Daily Price Chart

EURUSD eur/usd daily price chart

Chart prepared by James Stanley; EURUSD on Tradingview

AUD/USD Breakdown Potential at Decade Lows

Another area that could remain interesting for USD-strength is AUD/USD. I’ve been following this side of the pair for a little while now, initially riding the down-trend into August trade and then getting back on the short-side in mid-September. Since then, prices have dipped down to a key zone of support but, as yet, haven’t broken.

That support comes in at fresh decade lows that were set in early-August just below the .6700 handle. There have now been four different visits to this zone but, as yet, sellers haven’t been able to re-take control. If USD-strength does come back into play, that theme becomes one of the more interesting around major currency pairs.

AUD/USD Daily Price Chart

audusd aud/usd price chart

Chart prepared by James Stanley; AUDUSD on Tradingview

GBP/USD: British Pound Tapped-Lower as Brexit Remains a Mystery

We’re in October and later this month is supposed to finally bring Brexit. But it remains as murky as ever and another negative development earlier this morning has pushed the British Pound-lower. But, prices remain above the prior swing-low that was set around the 61.8% retracement of last month’s bullish move, and this can keep the door open for topside swing potential. This can remain interesting for USD-bears should this support zone hold through today’s trade.

GBP/USD Four-Hour Price Chart

gbpusd gbp/usd price chart

Chart prepared by James Stanley; GBPUSD on Tradingview

USD/CAD: Retains Bearish Potential Sub 1.3385

Also of interest for USD-weakness is USD/CAD. The pair jumped-higher to begin Q4 but, as yet hasn’t been able to re-test the key zone of resistance that came into play in early-September, leading to a sizable reversal down to the 1.3132 Fibonacci level. The continued posturing from buyers, showing short-term support around prior resistance without being able to punch up to fresh highs keeps the door open for reversal potential so long as the 1.3361-1.3385 zone remains unfettered.

USD/CAD Daily Price Chart

usdcad usd/cad daily price chart

Chart prepared by James Stanley; USDCAD 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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