US Dollar Talking Points:
- US markets are returning from a holiday this morning, and with US exchanges closed for business yesterday, the Greenback put in a resistance test at a key area on the chart.
- This week’s economic calendar brings Central Bank rate decisions out of both Canada and Europe. There are minimal expectations for any rate changes so as has become usual, the focus will be looking for hints of future rate moves or policy changes.
US Dollar Tests Resistance During Holiday
US markets are coming back online after a long weekend and in the FX-space, the big item is the recent dearth of volatility and the question of when something may show. This week’s economic calendar does offer some items of interest, with tomorrow highlighting Canadian markets with the 8:30 AM ET release of CPI numbers from December followed by the Bank of Canada rate decision at 10 AM. The European Central Bank offers a rate decision the morning after, and despite minimal expectations for any actual changes the focus will be on ECB President Christine Lagarde as she further puts her stamp on the bank with this being just her second rate decision at the helm. And in the backdrop, the Davos World Economic Forum is taking place, so this raises the possibility of surprise commentary evoking moves.
In the US Dollar, the currency has spent the first few weeks of January clawing back late-December losses. It was the final week of December that the USD pushed down to a fresh five-month-low, falling from a zone of key resistance that’s been in-play for more than the past year. This zone comes in around 97.70, the same price that helped to set the high in November and December of 2018, followed by multiple inflections last year. Most recently, this zone showed a turn on Christmas Eve; and the big question now is whether USD-bulls can continue to push up to what would amount to fresh monthly highs.
US Dollar Daily Price Chart
Chart prepared by James Stanley; US Dollar on Tradingview
On the long side of the US Dollar, AUD/USD remains with an interesting backdrop. The pair burst-above the key psychological level of .7000 ahead of last year’s close. What started as a pullback in a bullish theme soon turned into full-on reversal, however, as the RBA opened the door to the topic of rate cuts. Since then sellers have been back in AUD/USD, helping to push price action down to a fresh lower-low. Last week saw a quick flicker of strength, with the pair finding resistance at a prior support/resistance value at .6930.
| Change in | Longs | Shorts | OI |
| Daily | 2% | 3% | 2% |
| Weekly | 29% | -46% | 0% |
AUD/USD Four-Hour Price Chart
Chart prepared by James Stanley; AUDUSD on Tradingview
Should the US Dollar continue through that key area of resistance looked at above, the short-side of the pair could remain of interest, with focus steered towards prior supports around .6750 followed by the difficult-to-break area below the .6700-handle.
AUD/USD Daily Price Chart
Chart prepared by James Stanley; AUDUSD on Tradingview
GBP/USD Holds 2020 Support
Going along with that flare of strength in the US Dollar, GBP/USD bulls took a backseat as the pair took another trip below the 1.3000 level, albeit temporarily. Price action held support above last week’s low and buyers have slowly been returning since. Of issue for bulls is the 3117 Fibonacci level that marked last week’s high. A topside break above that level opens the door for a re-test of the 3187 level; bringing with it the benefit of a fresh higher-high which could open the door for GBP/USD bulls looking to topside continuation approaches.
| Change in | Longs | Shorts | OI |
| Daily | 3% | -7% | -3% |
| Weekly | 4% | -10% | -5% |
GBP/USD Four-Hour Price Chart
Chart prepared by James Stanley; GBPUSD on Tradingview
--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
