US Dollar Price Outlook Talking Points:
- It’s a big week for the US Dollar with drivers on the calendar for every day Tuesday-Friday. The highlights will likely be the FOMC rate decision on Wednesday and the NFP release on Friday.
- The US Dollar’s Q4 reversal calmed a bit last week as the USD pulled back. Current price action is holding at a zone of potential lower-high resistance.
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A Big Week for the US Dollar
This is going to be a big week for the US Dollar. The economic calendar is loaded with USD-related items and there’s also key rate decisions taking place in Canada and Japan to go along with the FOMC on Wednesday. So, buckle up as volatility is likely on the way.
Wednesday is especially busy. The Fed announces their October rate decision at 2PM at the bank is widely-expected to cut rates for the third consecutive meeting. But before that we hear from the BoC for their October rate decision, and earlier that morning brings the BoJ rate decision along with some key European data prints in German unemployment and CPI. Out of the US – there are high-impact releases every day of the week Tuesday-Friday, with Friday bringing both Non-Farm Payrolls and a recent sore spot for the US economy with ISM manufacturing.
DailyFX Economic Calendar: High-Impact US Data for This Week
prepared by James Stanley; Data from DailyFX Economic Calendar
US Dollar Reversal Pulls Back to Resistance
So far in Q4 the big item of interest has been the reversal in the US Dollar. The currency came into Q4 with a full head of steam, setting a fresh two-year-high on the first trading day of the quarter. But after that, the proverbial music stopped for the bullish theme as a series of bad US data prints helped to bring out the bears. Key for that early-month reversal was another poor ISM manufacturing report, which we’ll get the most recent print of on Friday just an hour and a half after NFP’s.
Last week saw sellers pullback on the throttle, owed at least partly to the busy outing on this week’s economic calendar.
US Dollar Daily Price Chart
Chart prepared by James Stanley; US Dollar on Tradingview
On a shorter-term basis, the US Dollar is now testing an area of resistance as taken from two confluent Fibonacci levels. The level of 97.86 is the 61.8% retracement of the 2017-2018 major move while 97.94 is the 23.6% retracement of 2014-2017 major move.
US Dollar Daily Price Chart
Chart prepared by James Stanley; US Dollar on Tradingview
EUR/USD Pulls Back After Draghi Swan Song
Last week marked Mario Draghi’s final rate decision atop the ECB and Christine Lagarde will head the bank from November onward. After an aggressive burst of strength in the first-half of this month, EUR/USD has calmed and started to pull back, finding a bit of support around the 1.1082 level that was looked at in last week’s webinar. But buyers haven’t exactly been able to take-over matters yet, either, leaving EUR/USD in a precarious spot on the chart. A hold of this support combined with a push back above the Friday swing high around 1.1125 can re-open the door for topside scenarios, while a further break-below the Friday low re-opens the door for a re-test of the 1.1000 psychological level.
EUR/USD Four-Hour Price Chart
Chart prepared by James Stanley; EURUSD on Tradingview
GBP/USD Pullback Stabilizes, Holds in Bull Flag
Also of issue this week is the Brexit deadline, set for 10/31 or this Thursday. The British Pound remains relatively strong, holding on to a large portion of the gains from the early-month breakout in GBP/USD. That breakout ran into some rather imposing resistance at the 1.3000 handle, and buyers haven’t yet been able to leave it behind. The corresponding pullback from that resistance has remained rather smooth, setting up within a bull flag formation.
Current support is showing around the 23.6% retracement of the recent bullish breakout. The 38.2% marker from that same study falls in a confluent zone that was used for higher-low support a couple of weeks ago, spanning from 1.2671-1.2705.
GBP/USD Two-Hour Price Chart
Chart prepared by James Stanley; GBPUSD on Tradingview
USD/CAD Bears Press Towards Yearly Lows
This should be a big week for USD/CAD. Not only do we have the flurry of US drivers on the calendar but the Wednesday Bank of Canada rate decision will likely be volatility-inducing. And while many pairs have pulled back on the basis of the US Dollar’s move last week, USD/CAD sellers have continued to push despite a big swath of support coming into play, and just below sits the yearly-low ominously above the 1.3000 psychological level.
Given the stretched downside move, combined with a couple of very key drivers on the horizon for Wednesday, and this could be a difficult spot to establish fresh bearish exposure. More attractive, however, would be a pullback to lower-high resistance at or around a prior spot of support, such as the 1.3132-1.3150 zone on the chart.
USD/CAD Daily Price Chart
Chart prepared by James Stanley; USDCAD on Tradingview
USD/JPY Builds Range Near Resistance
Given the early-month sell-off in the US Dollar, it might be surprising that the net move in USD/JPY was higher. But this was driven by an even weaker Japanese Yen than what showed in USD, and the pair rallied up to a fresh two-month-high even as USD sellers remained in-control. At this point, USD/JPY price action has spent much of the past week-plus building into a range near resistance. This keeps the pair attractive for long-USD strategies going into this week’s batch of USD-drivers, with the 109.67-110.00 looming large above current price action.
USD/JPY Four-Hour Price Chart
Chart prepared by James Stanley; USDJPY 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
