US Dollar Price Action Setups: EUR/USD, GBP/USD, USD/CAD, USD/JPY
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US Dollar Talking Points:
- The US Dollar is bouncing from support at 103.82, which was the 2017 high that was broken-through last month.
- The remainder of this week brings a loaded economic calendar for the US Dollar, with tomorrow’s final read on GDP followed by a speech from Chair Powell. Then Thursday brings PCE data which is the Fed’s preferred inflation gauge, and that’s followed by Friday’s PMI release.
- The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.
The US Dollar has spent much of the past two weeks pulling back, with the FOMC rate decision in the middle of June as the defining line. While the Fed didn’t necessarily say anything dovish there, the USD hasn’t yet been unable to take out or even test the high that was set just as the FOMC statement was released.
That pullback had taken on a somewhat orderly fashion, with a series of lower-highs to go along with horizontal support at 103.82. That price was the high in 2017 and it held as the five-year-high until it began to be tested in April, eventually giving way to bullish pressure in the month of May.
The combination of lower-highs with horizontal support set up a bearish formation, a descending triangle, that kept the door open for bears to pose a deeper pullback in the bullish trend. And with quarter-end fast approaching, that counter-trend move made sense.
But bulls wouldn’t allow it and, instead, we have a breach of the trendline marking lower-highs, which keeps the door open for another test at the 105.00 psychological level in DXY.
US Dollar Four-Hour Price Chart
A key push-point for this theme in the USD has been EUR/USD. Going along with that descending triangle in the US Dollar, EUR/USD had built the mirror image formation with an ascending triangle. Resistance was from the same 1.0593-1.0638 zone that’s been in-play as resistance in May and then support in early-June. That zone has seen three separate resistance tests since mid-June with bulls making slightly higher-highs each time.
But, like the US Dollar, the formation hasn’t yet filled and instead prices have pulled back. The big question here is whether sellers can make ground below the 1.0500 psychological level and, if they can’t, a return to resistance remains a possibility.
If sellers can pose a breach, follow-through support exists around 1.0450 and then 1.0357. If bulls can hold the low while forcing a late-quarter turn-around, next resistance beyond 1.0593 is the 1.0638 level, followed by a spot at 1.0695 and after that, the bigger zone of resistance running from 1.0767-1.0787.
EUR/USD Four-Hour Chart
GBP/USD: Cable Box
Cable put in a strong bounce around the FOMC rate decision and this followed a pretty threatening move when the pair crossed below the key psychological level at 1.2000. Since then, however, price has been directionless, with a rectangle formation building. Resistance is at 1.2333 and support at 1.2159.
Next resistance can be sought at 1.2380 followed by the 1.2452-1.2500 zone, with next support potential around the 1.2000 psychological level.
GBP/USD Four-Hour Price Chart
USD/CAD has pulled back from another failed attempt to leave the 1.3000 level behind. This psychological level has some history with the pair.
Over the past seven years, USD/CAD has been range-bound and the 1.3000 marker has been somewhat of a center-point for that theme.
USD/CAD Weekly Chart
Over the past couple of months, as the USD strength theme has been on display, USD/CAD has been attempting to leave 1.3000 behind. And in both May and June the pair was able to get above that psychological level but, as yet, no breaks have been sustained.
Instead, we now have a double top formation with more than 500 pips down to the neckline. This is a longer-term formation but, if it fills, would project down towards the 1.2000 level if bears are able to break support at 1.2518. This would be a longer-term theme and if the high is taken out at 1.3077, the formation is nullified, but this is something of interest for Q3 in the pair.
USD/CAD Daily Price Chart
Chart prepared by James Stanley; USDCAD on Tradingview
USD/JPY Support Check
USD/JPY set a fresh 24-year high last week and shortly after a brisk turn-around showed up. But, the support zone looked at last week quickly came into play, running from 134.48-135.00. That was an area of prior resistance that’s produced some significant grind in the pair so far.
Bulls have been pushing ever since that test and this sets the stage for another shot at the bullish breakout, with 136.71 looming overhead. A push beyond that high spells a fresh 24-year high in the USD/JPY pair.
USD/JPY Daily Chart
--- Written by James Stanley, Senior Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
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