Dollar Digestion: Price Action Setups
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- We started off by looking at what could bring back bullish scenarios for the U.S. Dollar, and a sustained top-side break over 101.53 could offer such an occurrence in DXY. However, until then, traders should remain nimble with little expectation for trend-continuation on USD-related setups.
- We then moved over to EUR/USD, which put in a decent top-side reaction off of the support zone around 1.0500 from earlier in the week. Despite this rather clean move, the fact that sellers have begun to show up – setting up near-term resistance around prior support; this would suggest that we may not have yet seen the low in EUR/USD. Patience should be utilized on bullish strategies, while bearish strategies will likely want to contain down-side targets above 1.0500.
- We then moved over to AUD/USD as a potential long-USD setup. AUD/USD has been running in a longer-term zone of resistance that makes up the top-side of a range that’s been active for almost a full year now. We had issued an analyst pick on the same setup earlier today, and that can be located at the following link.
- We looked at NZD/USD next, and the resistance level of .7335 is extremely attractive for potential short positions.
- We then moved over to USD/JPY. Given the lack of excitement to the bullish side of this setup, this would be further evidence that this recent bout of USD-strength in early February has probably less to do with rate hike fears rather than de facto USD-strength. Nonetheless, the more shallow retracement in January (as opposed to isolated DXY) would indicate continued bullish potential. The way that price action responds to this big zone of support from 111.61-112.40 could be very telling for the timing of that next trend-side entry.
- On the Yen side, we then moved over to EUR/JPY, which just put in an impressive element of support on an interesting level around ¥118.50. We discussed this setup yesterday in the article, Break Down to a Big Level.
--- Written by James Stanley, Analyst for DailyFX.com
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