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US Dollar Analysis: EUR/USD, AUD/USD, USD/JPY Ahead of Fed-Speak

US Dollar Analysis: EUR/USD, AUD/USD, USD/JPY Ahead of Fed-Speak

2020-01-09 08:00:00
Dimitri Zabelin, Junior Currency Analyst

US Dollar, Fed-Speak, AUD/USD, EUR/USD, USD/JPY – Talking Points

  • US Dollar may fall on Fed comments, cooling Iran tensions
  • Is the EUR/USD and AUD/USD recovery coming to an end?
  • USD/JPY chart shows pair may be on verge of bullish spike
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The US Dollar may experience unusually-high volatility ahead of a cascade of talks from six Fed officials throughout the day. The Greenback may trim some of its recent gains after escalated tensions between Iran and the US pressured risky assets and inflated demand for havens. However, ongoing de-escalation may erase of some of the USD’s gains as risk appetite is revived and priorities shift from preserving capital to returns.

US Dollar Index, S&P 500 Futures, 10-Year Treasury Yield, Crude Oil Prices – Daily Chart

Chart showing US Dollar Index

US Dollar chart created using TradingView

In the session ahead, traders will be paying particularly close attention to comments from Fed Vice Chairman Richard Clarida as he discusses the economy and monetary policy in New York. Towards the end of last year, he said he believes the economy is in a “good place” and expects it to continue into 2020. He also emphasized the Fed’s neutral position. Despite his comment, overnight index swaps are pricing in a 25-bps cut by year-end.

Chicago Fed President Charles Evans echoed a similar sentiment, pointing to economic conditions remaining favorable despite softer growth in manufacturing. If we see an upbeat tone from Fed officials, it could cool 2020 rate cut bets after the most recent spike and pressure the US Dollar. Conversely, a gloomier outlook could reignite haven demand and push the USD higher along with equities who may cheer future liquidity provisions.

To get live coverage of Fed officials speaking with asset reactions, be sure to follow DailyFX on Twitter!

US Dollar Index: Has it Bottomed Out?

After breaking the multi-month uptrend, the US Dollar faced overwhelming selling pressure and retreated around 3.50 percent before bottoming out at nine-month lows. Looking ahead, the US Dollar index may encounter some resistance at 1.2888. An upside breakout there could open the door to testing another ceiling at 1.2936. Conversely, failure to break 1.2888 could see the Greenback erase some of its recent gains.

US Dollar vs Currency Basket of Euro, Japanese Yen, Australian Dollar, British Pound

Chart showing US Dollar Index

US Dollar Index chart created using TradingView

AUD/USD: Is the Fun Now Over?

After rising just under four percent since December 2, 2019 and shattering the December 2018 descending resistance channel, AUD/USD’s rise may be coming to an end. The pair is hovering just above former resistance-now-turned support, and a bounce back could reignite a bullish flame. Conversely, a downside breakout could catalyze a selloff if traders believe the prior downtrend is once again in play.

AUD/USD – Daily Chart

Chart showing AUD/USD

AUD/USD chart created using TradingView

EUR/USD: Downtrend to Resume?

EUR/USD recently broke below the November 29, 2019 uptrend and re-entered a familiar congestive zone between 1.1091 and 1.1121. If the pair manages to shatter the upper layer with follow-through, it could become a new support level from which EUR/USD may use in the near-term. Conversely, a downside breakout below 1.1091 could open the door to retest 1.1039.

EUR/USD – Daily Chart

Chart showing EUR/USD

EUR/USD chart created using TradingView

USD/JPY Outlook Bullish Long-Term?

Looking at a monthly chart of USD/JPY shows the pair has entered a consolidation period since mid-2015 and appears to be forming a continuation pattern known as a Symmetrical Triangle. Given the prior uptrend, if USD/JPY breaks above descending resistance with follow-through, it may open the door to a bullish spike and resumption of the prior ascent.

USD/JPYMonthly Chart

Chart showing USD/JPY

USD/JOY chart created using TradingView


--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.


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