US Dollar Technical Outlook: EUR/USD, GBP/USD, USD/CAD, USD/JPY
US Dollar Talking Points:
- USD sellers have reemerged after the December open, helping to push the USD off of a key zone of resistance.
- With prices now testing a zone of recent support, the big question is whether USD sellers can push a deeper sell-off, breaking the range that showed up around the currency in November.
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US Dollar Drops, but Can Sellers Push Through Support?
The US Dollar has seen sellers re-emerge after the December open, and this keeps the bearish Q4 theme in the USD of interest. The US Dollar remained relatively strong through the first three quarters of the year despite the fact that the FOMC moved from a stance of tightening last year into three rate cuts in 2019. But, despite those rate cuts the Dollar just continued to march higher, even as President Trump openly talked about the perils of a stronger currency while pointing the finger directly at FOMC Chair, Jerome Powell.
Coming into Q4 the backdrop was set for bears to take-over in the currency and that’s what started to happen in October as price action fell below a rising wedge formation, which will often be approached for bearish reversals. Sellers continued to swing into the November open, at which point a retracement developed. The first-half of November saw 50% of that October sell-off clawed back, but a key zone of resistance helped to keep the move in check. This same zone came into play again towards the end of the month, once again holding buyers at bay until sellers could re-appear around the December open.
US Dollar Four-Hour Price Chart
At this stage, the US Dollar is grasping on to a familiar level for support around the price of 97.70 on DXY. This is the same price that held the highs in November and December of last year, and again in March of 2019. This is also the same zone that held the sell-off after the mid-November resistance inflection, and a push below this area opens the door for a re-test of three-month-lows around the 97.11 area on the chart.
US Dollar Daily Price Chart
EUR/USD at Confluent Resistance
Given that recent theme of mean reversion in the USD and a similar theme has played out in EUR/USD. Resistance has shown around a confluent set of Fibonacci levels around 1.1083 while support has held around the 1.1000 handle.
The devil here is in the details, as the USD is currently in the process of pushing below support while resistance is showing a much more respectable hold here in EUR/USD. I had looked into strategy around the pair in yesterday’s webinar, and the range remains workable until buyers take out the three-week-highs.
EUR/USD Four-Hour Price Chart
GBP/USD Breaks Out to Fresh Highs
I had looked into GBP/USD yesterday as the pair was testing a big level of resistance at the 1.3000 handle. As written, the possibility did remain for bullish breakout strategies on prints of fresh six-month-highs; at which point quick scale-outs around the 1.3050 area coupled with break-even stop moves could come into play.
Now that the pair has broken out, traders are likely left with the prospect of waiting for a pullback to get long in the move. That prior area of resistance around the 1.3000 handle could become of interest should such a scenario show in the near-term.
GBP/USD Four-Hour Price Chart
USD/CAD Holding at Resistance Ahead of BoC
Later this morning brings a Bank of Canada rate decision with minimal expectations for any actual moves. As has become the norm of recent around the BoC, the details are of interest in the effort of plotting when that next move, in either direction, may take place out of the bank.
In USD/CAD, the pair remained visibly strong even as USD-weakness came into the fray around the December open, owed to a very weak Canadian Dollar and making the prospect of short-side plays in USD/CAD a bit more of a challenge. But – taking the context into account and a series of resistance levels sit above current price action, making the prospect of bullish strategies equally if not more challenging.
This puts focus on today’s BoC rate decision, and if CAD-strength does show in response, the door could quickly re-open to bearish USD/CAD strategies.
USD/CAD Daily Price Chart
USD/JPY Tests Fibonacci Support
The recent reemergence of USD-weakness has taken a toll in USD/JPY, where the pair fell by more than 100 pips in the early-portion of this week. A Fibonacci retracement of relevance has continued to help define support and resistance, and this setup can be found by drawing the study from the November 2017 high down to the March 2018 low.
Last week’s resistance came in around the 50% marker of that major move at 109.67, and price action made a quick run right back down to the 38.2% retracement of that same study at 108.47, and this is a level that’s had considerable interest in the USD/JPY pair so far this year. This keeps the door open for bullish strategies in the pair, particularly for those looking to fade this recent round of USD-weakness while looking for recovery themes to take-hold.
USD/JPY Daily Price Chart
To read more:
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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.