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Drilling Around the Dollar: USD Price Action Setups

Drilling Around the Dollar: USD Price Action Setups

2016-05-31 18:31:00
James Stanley, Strategist
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Talking Points:

- This is the archived recording of today’s price action webinar in the Live Trading Room of DailyFX, in which we used price action to analyze technical setups while incorporating macro-economic analysis and risk management.

- We kicked off with GBP/USD, as a recently unveiled poll showed a majority of responses voting to leave the EU; and this very much goes against the recent theme of GBP-strength on the back of Brexit fears (apparently) getting priced-out of the market. Given the Sterling’s relative performance against the USD, particularly over the past couple of weeks, this may be one of the few currencies that could be attractive for USD-weakness strategies. But at the moment this thing is dropping like a rock, so wait for support to show before strategizing around the long side of GBP.

- We outlined the full setup in GBP/USD in last week’s Technical Analysis article, and as was the case last week, a higher-low in the pair could allow for a top-side entry. But we’re fast approaching a crucial level of support at 1.4443, and should this be violated, the bullish up-trend may be negated. But should a ‘higher-low’ print north of this prior swing-low, a top-side resumption setup will be possible. Until then, be careful of looking to get long, and watch for price action to develop support.

- We then moved on to the US Dollar to denote its furthered bullish structure. We had also looked at this setup in this morning’s Market Talk (to subscribe to Market Talk, please click here). USD just bounced off of a prior level of resistance with today’s price action, and with a large amount of US data to be delivered in the remainder of this week, we’ll likely see some continued volatility here.

- On the theme of USD strength, there are numerous currency pairs that traders might be able to focus on. We started off with EUR/USD, as we’ve seen a major level of support recently give way at 1.1212; and we outlined that setup last week in the article, EUR/USD, GBP/USD Showing Divergent Trends.

- We also looked at a setup in AUD/USD after the pair ran into a really strong confluent support level between .7183-.7203, with two different Fibonacci retracement levels within a 20-pip range. As we looked at, this support has stubbornly spurned the declines in Aussie for now; so traders will likely want to account for that in the approach, letting price action rip higher to look for resistance in the .7280-.7307 area on the chart.

- We finished by looking at Gold, which also had a recent major inflection with a support level at $1,200.41, which is the 61.8% retracement of the 45-year move in Gold prices, taking the low from 1968 at a price of $34.95 to the $1,920.80 high set in 2011. We took a look at the setup in last week’s Gold Technical Analysis article, Don’t Fight the Fed. With the aggressiveness of the down-trend throughout the month of May, this isn’t a support level that’s attractive for a reversal, but rather a profit target for short-side continuation moves should resistance show in the $1,217.26 vicinity.

--- Written by James Stanley, Analyst for DailyFX.com

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