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Dollar Resurgence: Price Action Setups

Dollar Resurgence: Price Action Setups

2017-03-02 20:45:00
James Stanley, Strategist
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- We started this session by looking at the recent top-side burst in the U.S. Dollar, as DXY has cleared above the pivotal level of 101.53. This opens the door for USD-continuation strategies under the prospect of additional top-side in the currency.

- The first market we looked at for such a play was USD/JPY. This pair has put in a significant bounce over the past couple of days, but is working with some near-term resistance levels. We discussed a couple of different ways of trading the move, and if you’d like to read more about that, please check out our Market Talk article from this morning entitled, Dollar Surge Continues as Spotlight Moves to Potential March Rate Hike.

- We then looked at USD/CAD which is the losing side of a two-part setup that I had worked with leading into Tuesday’s events. To see the Analyst Pick from Tuesday with both setups, please click here.

- We then moved over to EUR/USD. We had looked at a bullish setup in EUR/USD last week when the pair was trading around the 1.0500 zone of support, and we have that same situation again. This may be a bit more dangerous though given that pervasive strength that’s currently showing in the Dollar; so rather than looking to buy Euros against a Strong USD, EUR/JPY may present a more attractive setup.

- In EUR/JPY, we have the prospect of top-side continuation as the pair holds on to recent gains. We’d discussed this setup in our technical article on the pair yesterday entitled, ‘The Big Level Plays, Now What?

- We then moved over to the British Pound, which is also working at a big level of support around 1.2250. Given the pervasive bearishness in the pair, this would likely be a difficult option to work with for USD-weakness scenarios. And for USD-strength plays, there are problems as well as there’s been a strong build of support around the 1.2000 handle, thereby limiting potential profit objectives.

- We then looked at GBP/JPY after a recent symmetrical wedge has given way.

- We then moved over to AUD/USD, which is finally putting in a down-side turn after hanging out a long-term zone of resistance for a couple of weeks.

- We then finished with Gold. Gold prices have taken a hit today; but the interesting ‘play’ here isn’t with current price action – it’s for what may be around the corner. If Gold prices can continue heading-lower as rate expectations continue to rise – this can open the door to a long-term zone of support at $1,215 or perhaps even $1,200. And this can open the door for bullish strategies in Gold under the presumption that the Fed will back away from a near-term hike if that level of strength is seen in the Dollar.

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

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