US Dollar Returns to Resistance: USD Trade or Fade, AUD/USD, GBP/USD
US Dollar Talking Points:
- The bullish November theme in the US Dollar continues as DXY has returned to a key area of resistance on the chart that came into play last Friday.
- Given this USD-resistance there are plays on both sides of the matter. For those looking at a USD-breakout, the short-side of AUD/USD remains attractive. For those looking at bearish swings in the USD, GBP/USD remains compelling.
- 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 Bulls Push in November
The bullish November theme in the US Dollar has continued as DXY has pushed right back into a zone of key resistance that runs from 98.33-98.50. This was the same zone that held the yearly highs in April and May of this year. Buyers were eventually able to pose a topside break through the late-portion of this summer but bulls were unable to hold the move, leading in to the rising wedge formation that was looked at in the Q4 Technical Forecast for the US Dollar. October brought a strong theme of weakness that ran for pretty much the entirety of the month as USD set a fresh two-month-low on the first trading day of November.
Since then, however, its been a far different scenario as buyers have come back to the table to retrace 50% of last month’s sell-off, with price action finding resistance in this confluent zone on the DXY chart.
US Dollar Daily Price Chart
AUD/USD: Trendline Reaction, Can Sellers Continue to Push?
On the long side of the US Dollar, AUD/USD remains compelling. With last month’s USD sell-off, AUD/USD lifted all the way from an October low below the .6700 level to a key level of resistance around the .6900 handle. As USD-strength has come back in November, that bearish trendline reaction has hastened, and this keeps the door open for short-side strategies in the pair; particularly for traders that want to look for a deeper move of strength in the US Dollar. Next stops of support could be sought around the .6809 swing low followed by a zone of prior support around the .6750 psychological level. After that, the door is open to a re-test of the .6700 support that currently marks decade-lows in AUD/USD.
AUD/USD Daily Price Chart
For USD-Weakness, GBP/USD
On the short-side of the US Dollar, GBP/USD remains compelling. The pair pushed up to the 1.3000 level during the month of October as both USD-weakness and Sterling-strength ruled the month. And after testing below 1.2000 in early-September this amounts to a rather outsized move in a relatively short period of time.
As looked at in this week’s forecast, GBP/USD still has yet to put in bullish cues as pullback potential remains. A key zone of confluent support lurks below around the 1.2700 area and buyers have stepped-in ahead of a re-test there. But – follow-through support is showing at the 23.6% retracement of last month’s bullish breakout. A continued hold here, combined with a test above the 1.2900 resistance area gives a fresh series of higher-highs and higher-lows, which can re-open the door for bullish strategies looking for a move back towards the 1.3000 handle.
GBP/USD Two-Hour Price Chart
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
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--- 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.