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Does This USD Breakout Have Staying Power?

Does This USD Breakout Have Staying Power?

2016-10-18 18:44:00
James Stanley, Strategist
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Talking Points:

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- In this webinar, we used price action to look at the recent breakout in the US Dollar to ask whether or not this top-side break had staying power. And rather than just load-in to Long USD setups in anticipation that the move will definitely continue, we looked at spreading risk around the US Dollar by investigating both setups of strength and weakness.

- For USD strength we looked at USD/CAD trading very near a current support zone. A little below current price action is the vaulted psychological level at 1.3000, and 15 pips below that we have a long-running Fibonacci level. This can open the door to top-side plays, and with the Bank of Canada on deck for a rate decision tomorrow – this pair is primed to move.

- We then moved to look at NZD/USD; which, while bullish, is currently showing a potential short-side swing setup, as price action has just moved up to and shown the initial signs of resistance off of a prior level of support. As we showed, the shorter-term charts can be used to follow momentum in the effort of catching a down-side move on the longer-term charts. As we saw on the webinar, momentum on the hourly and 5-minute charts was still bullish, so resistance isn’t quite yet ready here: But should lower-lows begin to show, that theme may become prevalent before long.

- We also looked at USD/JPY with the potential for a longer-term deviation between representative Central Bank policies. While the Dollar is breaking higher on the back of more hawkish Fed rhetoric, a weak-Yen in the coming days/weeks/months could certainly assist in the furthering of that theme in the pair.

- On the side of USD-weakness, we looked at EUR/USD. Euro has been rather range-bound since QE actually began in March of 2015; and this recent bout of USD-strength has just ran price action in the pair down to a prior support level around the 1.0950-level. There’s a long-running trend-line just below price action and with an ECB meeting on the docket for Thursday, this is another pair that’s primed to move.

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

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