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US Dollar Perched at Highs Ahead of FOMC: Will USD Reverse?

US Dollar Perched at Highs Ahead of FOMC: Will USD Reverse?

2020-01-29 13:30:00
James Stanley, Strategist
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US Dollar, EUR/USD, GBP/USD, USD/CAD Price Analysis

  • Today at 2PM ET brings the FOMC for the January rate decision.
  • There are minimal expectations for any actual moves.
  • The focus for today is on clues or hints as to what the FOMC might do later in the year.

US Dollar Perched at Highs Ahead of FOMC

The US Dollar is nearing the close of what’s become a really strong month; and the currency has clawed back almost the entirety of the December sell-off with a key zone of resistance sitting overhead. This area runs from 98.33-98.50 and this is the spot on the chart that held the highs in DXY in both mid-November as well as later-in-the-month as the door opened into December trade. After setting a fresh five-month-low on the final trading day of 2019, with the USD getting an assist from a long-term Fibonacci level as support; buyers have been at work through January to push the USD-higher by as much as 1.9%.

At the source of the move has been diminishing hopes of any near-term rate cuts out of the FOMC, with today’s meeting bringing expectations for the bank to hold flat. From rates markets, however, later in the year brings considerably more variability, with December showing a fairly-wide spread of expectations for future FOMC policy. I had looked into this in yesterday’s webinar and this sets up a fairly interesting backdrop around the bank ahead of today’s rate decision, even with the expectation for no near-term moves to be announced.

US Dollar Four-Hour Price Chart

us dollar four hour price chart

Chart prepared by James Stanley; US Dollar on Tradingview

EUR/USD Testing 1.1000

Ahead of today’s FOMC rate decision the world’s most popular currency pair is testing a bit zone of support around the psychological 1.1000 level. This same zone helped to hold the lows in the pair in mid-October and a couple of different times in November. Below current prices, the three-month-low lurks around 1.0980 and 1.0956 is a Fibonacci level. Underneath that is the two-year-low that was set on the first day of Q4, residing around 1.0880.

EUR/USD Daily Price Chart

eur/usd eurusd price chart

Chart prepared by James Stanley

GBP/USD: Cable Grasps for 1.3000 Ahead of BoE

Tomorrow brings another rate decision of note as the Bank of England will host Mark Carney’s final rate decision atop the bank. There’s an actual chance of a cut at this meeting as a parting gift from Mr. Carney, and this has helped the British Pound to remain relatively weak of recent, even with Brexit-day fast approaching later this week.

GBP/USD put in a sizable breakout in Q4 as driven by Brexit sentiment. After a rough and tumble first eight months of the year, the pair finally found support in August/September and began to rally in October. At the time, resistance played-in off of the 1.3000 handle and that held for about six weeks, leading into December before another breakout could take place; this time with GBP/USD finding resistance at the 1.3500 psychological level.

Since then – it’s been digestion as the pair has traded within the confines of prior highs and lows; keeping the door open to breakout potential at some point in the near future. For now – that 1.3000 level is coming into play to help hold the lows and this can set up an interesting backdrop for the next 24 hours that include rate decisions from both economies represented in the GBP/USD pair.

GBP/USD Daily Price Chart

gbpusd daily price chart

Chart prepared by James Stanley

USD/CAD Stretched into Resistance

Last week brought a couple of key drivers in USD/CAD and the pair jumped as CAD-weakness was priced-in. USD/CAD has largely held that pace so far with buyers coming in to offer support at higher-lows; and price action is grinding at a key area of resistance, taken from the 1.3180-1.3200 area on the chart.

USD/CAD Daily Price Chart

usdcad daily price chart

Chart prepared by James Stanley

--- 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.

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