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U.S. Dollar Price Action Setups: USD/JPY, EUR/USD

U.S. Dollar Price Action Setups: USD/JPY, EUR/USD

James Stanley, Senior Strategist

- If you’re looking for trading ideas, check out our Trading Guides. And if you’re looking for ideas that are more short-term in nature, please check out our Speculative Sentiment Index (SSI) Indicator.

- In this webinar, we used price action look at the U.S. Dollar with inclusion of this morning’s Humphrey-Hawkins testimony from Fed Chair Janet Yellen.

- After the U.S. Dollar put in a near-historic run in the second half of Q4, 2016, January saw a retracement of more than 50% of that move, raising questions around long-term sustainability of strength in the Greenback. But February has brought a brisk change-of-pace as bulls have returned with force.

- This bullish price action in USD throughout February has now retraced more than 38.2% of the January move; but a break above 101.53 marks a cross of the 50% marker of that same move, and this can be beneficial for long-term USD strength strategies.

- The first area we looked at for USD-strength is in USD/JPY. While the Dollar retraced more than 50% of the ‘Trump Bump’ in that January move, USD/JPY put in a rather attractive 38.2% retracement; alluding to the fact that the Yen has carried a bit of additional weakness into the equation. For long-term USD-strength scenarios, USD/JPY remains as an attractive venue for such a theme. We looked at potential entry protocol on the hourly chart given recent price action.

- We then moved over to EUR/USD which has seen an increase in bearish price action of recent, including another break of the 2+ year bear flag formation. We looked at a possible resistance zone to watch for in the effort of downside continuation in the pair.

- We looked at Gold as an arbiter of the USD-strength on rate hike fears theme, and as we looked at – Gold remains supported. So traders would likely want to entertain options on the USD-weakness side of the equation as well; and for that we looked at NZD/USD and GBP/USD as possible options.

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

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