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US Dollar Price Action Setups: EUR/USD, GBP/USD, USD/CAD, USD/JPY

US Dollar Price Action Setups: EUR/USD, GBP/USD, USD/CAD, USD/JPY

2020-03-09 17:10:00
James Stanley, Strategist
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US Dollar, EUR/USD, GBP/USD, USD/CAD, USD/JPY Price Analysis

US Dollar Continues to Slide

It’s been a week of historic moves across global markets and going by this week’s open, there’s more to come. While fears around Coronavirus have continued to spread rampantly, perhaps faster than the virus itself; it’s the related panic that’s already creating issues across global markets and this is something that may be even more difficult to recover from. Oil prices put in a historic gap-down this morning and this is likely to put even more pressure on a US banking sector that will be beset by a low rate paradigm in the latter-portion of this year; and that’s in a best case scenario in which the direct damage from Coronavirus is somewhat contained.

Last week’s emergency rate cut out of the FOMC seems to have done little to stem the fear, nor the spread of fear; and markets are now expecting the bank to cut even deeper at their rate decision next week, scheduled to be announced on March 18th.

In the US Dollar, this has amounted to a stunning reversal-of-fortune as the currency just set a fresh three-year-high only a few weeks ago. Since then, sellers have come back, with aggression, to drive down to a fresh yearly low.

At this point, the USD is holding on to support around the 95-handle on DXY and this is the same zone that held the lows in early-2019 trade.

US Dollar Weekly Price Chart

US Dollar Weekly Price Chart

USD on Tradingview

EUR/USD Jumps to 1.1500 Handle, Finds Sellers at Key Area on the Chart

What a difference a few weeks can make. It was in the third week of February when sellers started to slow their push in EUR/USD. The pair sat ominously within a gap that had remained on the charts since April of 2017; but as a range began to build on shorter-term charts, buyers began to get a bit more aggressive until, eventually, an ascending triangle formation had built. Such formations will often be approached with the aim of bullish breakouts; and breakout it did.

EUR/USD BEARISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -2% -26% -13%
Weekly 65% -28% 10%
Current Retail Sentiment in EUR/USD
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That bullish theme is continuing to run as EUR/USD price action has shredded through a couple of key resistance zones already. The 1.10000 area gave a pause to the push, as did the 1.1187-1.1212 area. But that sell-off in the USD has remained forceful and now EUR/USD is testing a key zone of longer-term interest on the chart, as seen on the weekly EUR/USD chart below.

EUR/USD Weekly Price Chart

EURUSD Weekly Price Chart

EUR/USD on Tradingview

GBP/USD Re-Tests Key Resistance

A similar pattern of relief has shown in GBP/USD albeit to a lesser degree. Coming into last week, the British Pound remained fairly weak and Cable drove-down to a fresh four-month-low on the final trading day of February. Since then, however, a far different theme has taken-over as that obtuse move of USD-weakness has permeated through global markets. This has helped to propel GBP/USD up to a key zone of chart resistance, taken from the 1.3187 level which is the 23.6% retracement of the 2014-2016 major move.

GBP/USD BEARISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 7% -17% -5%
Weekly 12% 0% 6%
Current Retail Sentiment in GBP/USD
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GBP/USD Daily Price Chart

GBPUSD Daily Price Chart

GBP/USD on Tradingview

USD/JPY Plummets to Three-Year-Lows

USD/JPY has not escaped unscathed from the brutal move in the US Dollar and USD/JPY is now trading at fresh three-year-lows following this week’s gap-down. USD/JPY gapped-through the psychological level at 105.00 and sellers have so far retained control of price action in the early part of this week.

USD/JPY MIXED
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -5% 13% 3%
Weekly 43% 0% 19%
Current Retail Sentiment in USD/JPY
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Fast approaching is a zone of support that held the lows in the pair through summer and fall of 2016; around the 100.00 level in the pair with the November 2016 low around 101.20 helping to cauterize this morning’s support.

USD/JPY Monthly Price Chart

USDJPY Monthly Price Chart

USD/JPY on Tradingview

USD/CAD – One of the Few Areas for US Dollar Strength

I’ve discussed this one numerous times over the past month as it remains one of the few markets that may hold some attraction for long-USD strategies.

Despite the historic moves showing across US markets, the Canadian Dollar has remained even weaker than the US Dollar of recent. USD/CAD jumped up to a fresh two-year-high earlier today, gapping-up after a big move showed in oil futures. This highlights how the Canadian Dollar has been even weaker than the US Dollar; and this is something that could keep USD/CAD as an area of attraction for those looking at USD-strength.

USD/CAD Weekly Price Chart

USDCAD Weeky Price Chart

USD/CAD on Tradingview

On a timing front – traders are likely going to want to proceed with caution as this week’s gap has left an extended wick on the Daily chart. This is the type of formation that can often precede reversals or bearish scenarios; and this is something that can further illustrate the importance of caution when dealing with a very volatile market.

USD/CAD BULLISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -4% 6% 2%
Weekly 8% 23% 17%
Current Retail Sentiment in USD/CAD
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On a shorter-term basis, the gap in USD/CAD has already begun to fill, and eventual support showing at or around last week’s close could potentially re-open the door for bullish strategies in the pair.

USD/CAD Four-Hour Price Chart

USD/CAD Four Hour Price Chart

USD/CAD on Tradingview

--- 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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