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USD Setups with a Longer-Term Focus Ahead of Jackson Hole

USD Setups with a Longer-Term Focus Ahead of Jackson Hole

James Stanley,

Talking Points

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- In this webinar, we used price action to look at macro markets ahead of the start of the Jackson Hole Economic Symposium later in the week. As the event kicks off on Thursday, the U.S. Dollar finds itself remaining near one-year lows - so in the effort of taking a ‘big picture’ perspective into this event, we looked at longer-term charts and setups across the U.S. Dollar.

- We started by trying to put into perspective the bearish move so far this year in the U.S. Dollar. The Dollar is down 10% from this year’s highs, and this is likely due to a number of reasons. This is similar, albeit more pronounced than what we saw last year, when USD spent most of the first eight months of the year with a negative bias, only to find a gust of strength at Jackson Hole that took us all the way into the Presidential Election. If we do see weakness in USD around this driver, look for support from 91.92-92.18 on DXY.

- We then moved over to EUR/USD, which is putting in the opposite of the bearish move that took place in 2014-2015. That was when markets were attempting to front-run the start of ECB QE, and when QE did actually start in Europe in the second week of March, 2015, EUR/USD quickly put in a low as the market then ranged until December of 2016. But more recently, we’ve seen traders bidding the Euro higher under the presumption that the ECB will need to walk away from their massive QE program as growth and inflation has started to show with a bit more consistency in the bloc. This has many looking to Jackson Hole for a potential announcement from ECB President Mario Draghi around such a scenario; but the ECB meeting on the calendar two weeks later might make for a more amenable backdrop. The prerogative around EUR/USD going into Jackson Hole is to look for a deeper retracement. While current support has been holding, the lows are sliding-lower, indicating waning bullish support at current levels. The areas around 1.1600 and 1.1500 could open the door for a bullish continuation scenario in EUR/USD.

- We then moved over to GBP/USD, which is currently testing below support. The pair came very close to activating the short-side setup in last week’s Analyst Pick with the bearish run this morning, but the support level at 1.2809 did not give way despite two separate tests. The potential remains for bearish continuation in the pair, and if we do see USD-strength show around Jackson Hole, this could be one of the more interesting markets to work with such a theme.

- We then moved over to USD/CHF, and we looked at a short-term inverse head and shoulders pattern that hasn’t quite played out yet. But the more pertinent aspect of the formation remains, and that’s the resistance level around .9770. On the other side of Swissy, we have support that’s continued to show above .9400, and with price action testing the under-side of a previously bullish trend-line, the door can be opened for short-side continuation if .9400 support is broken.

- We then moved over to USD/CAD. This pair is a bit messy at the moment, but the aggressive bearish run from May-July is noteworthy. A 38.2% retrace of this move can open the door for short-side continuation, and this works well with the scenario of USD-strength around Jackson Hole.

- We then looked at AUD/USD using a couple of longer-term Fibonacci retracements. We showed how a potential bearish reversal can be plotted in the pair using near-term resistance dynamics.

- We then looked at EUR/JPY and GBP/JPY. The setups that we discussed last week are still work-able, as GBP/JPY has put in deeper downside development while EUR/JPY has continued to hold the line around the very key fib level of 128.52.

--- Written by James Stanley, Strategist for

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