US Dollar Talking Points:
- The US Dollar is grasping for support through the 2020 open after an outsized bearish theme showed up in Q4 of last year. Can sellers continue to drive?
- Commodity currency pairs have shown that USD-weakness most vividly, with both USD/CAD and AUD/USD put in notable moves. Meanwhile, EUR/USD remains at a key resistance area on the chart.
US Dollar Grasps for Support After Q4 Reversal
The US Dollar has come into 2020 after testing a key area of support ahead of the 2019 close; finishing a strong Q4 reversal after what had been a generally upbeat first three quarters of 2019. This support comes in around the 96.47 level, which is the 23.6% Fibonacci retracement of the 2011-2017 major move in DXY. This same level had helped to set resistance in August of 2018 before becoming support in December of that year. Below current price action, support potential exists at 95.82 which provided a couple of different support inflections in 2019, after which the 95.03 level becomes of interest as this marks the 2019 low that was set in the second week of last year.
US Dollar Weekly Price Chart
Chart prepared by James Stanley; US Dollar on Tradingview
USD/CAD Plummets to Yearly Low, Takes out 1.3000 Big Figure
That US Dollar sell-off is most visible against commodity currencies and USD/CAD is a prime example. Given the outsized move in Oil prices on heightened geopolitical tensions, the pair has had a bit of additional drive-lower as CAD strength has helped to hasten the declines, taking out the 1.3000 level on the last day of 2019 after sellers had previously shied away from the big figure on a number of instances. That psychological level has already been re-purposed as resistance in the early outlay of the New Year as a small range has developed near these 15-month lows. Below current price action, another area of support interest shows around 1.2928, which is the 50% marker of the 2017 sell-off in the pair.
| Change in | Longs | Shorts | OI |
| Daily | 1% | -7% | -3% |
| Weekly | 43% | -18% | 5% |
USD/CAD Weekly Price Chart
Chart prepared by James Stanley; USDCAD on Tradingview
EUR/USD Rides at Resistance, Can Bulls Break Through?
The month of December saw a bullish move develop in EUR/USD after the pair had spent much of the prior four months digesting in a symmetrical wedge formation. That breakout flickered-higher on the heels of the December ECB rate decision, which was Christine Lagarde’s first as the European Central Bank President. That pattern of strength has largely remained in tact ever since, helped along by the drubbing in the US Dollar, and price action in EUR/USD is currently caught at a key area on the chart that runs from 1.1187-1.1212. This zone has seen numerous inflections over the past few years, most recently helping to set resistance in August after showing as support in June and July. A hold of resistance in the current zone can keep the pair of interest for reversal scenarios, particularly for those looking to long scenarios in the US Dollar.
EUR/USD Daily Price Chart
Chart prepared by James Stanley; EURUSD on Tradingview
AUD/USD: Pulls Back After .7000 Re-Test, Can Buyers Continue to Push?
The first eleven months of last year brought an aggressively bearish trend into AUD/USD, continuing a move that had driven for the bulk of the prior year, as well. After topping-out above .8100 in January of 2018, sellers remained in control until a new level of support came into play around the .6700 handle. That support zone was tested multiple times in August, September and October of last year, with each instance seeing bears unable to break through.
As USD-weakness showed up in December AUD/USD broke through a number of resistance variables, including a late-month run above the .7000 psychological level that hadn’t been in-play for more than five months prior. Buyers were unable to sustain the move through the 2020 open and price action has pulled back to find short-term support at an area of prior resistance, taken around the .6930 level on the chart.
AUD/USD Daily Price Chart
Chart prepared by James Stanley; AUDUSD on Tradingview
--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
