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Trading Around the U.S. Dollar's Fresh 2.5 Year Lows (Webinar)

Trading Around the U.S. Dollar's Fresh 2.5 Year Lows (Webinar)

James Stanley, Strategist

Talking Points

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- This is one of the many DailyFX webinars that we host each week, most of which are completely free to all traders. If you’d like to attend this event in the future, or if you’d like to find another of our webinars that may fit your trading style even better, please check out our DailyFX Webinar calendar to find the best session for you.

- In this webinar, we used price action to look at macro markets after another burst-lower in the U.S. Dollar. This move in USD took out the low from May of 2016, leading to a fresh 2.5 year low in ‘DXY’.

- The move of USD-weakness caught another gust of selling after Fed Chair Janet Yellen’s comments last Friday, and that sell-off continued into this morning after news broke of a North Korean missile traveling over Hokkaido, Japan. After running down to that low, buyers began to show up, and at this stage, the daily candle is giving the appearance of a dragonfly doji with the low piercing support. This can open the door for the interesting reversal setup of the pin bar. Given the veracity of the recent trend, the short-side set would be a near-term type of strategy.

- On the topic of pin bars, we looked at a potential setup in EUR/USD after this morning’s advance over 1.2000 has been faded-out. If EUR/USD closes today’s daily bar below 1.2000, the pin bar setup is there as the elongated wick atop today’s daily candle is ‘sitting out’ from recent price action; and this can open the door to bearish reversal strategies in the pair.

- We then moved over to GBP/USD, which has put in a couple of interesting formations itself. Yesterday, we wrote about the morning star formation on the Daily chart. The hourly chart in GBP/USD shows the bottoming-out of that move making-up the morning star as a cup and handle formation, which also denotes bullish continuation. But after pressing-higher, Cable has found resistance at a key area, the 50% Fibonacci retracement of the most recent major move around 1.2928. Setups can be justified on either side of this pair at the present, as short term support showing at this Fib level can open the door for near-term bullish strategies, while continued resistance from 1.2930-1.2960 can open the door for ‘lower-high’ resistance on longer-term variations such as the four-hour or daily.

- We then looked at the continued range in USD/JPY. As the Dollar sell-off was hastening in the overnight session, the ‘big picture’ support zone in USD/JPY was pierced. But buyers showed-up above the bottom of the zone around 108.13, and this keeps the months-long range intact. If prices begin to work higher, long positions under the presumption of range-fill can become attractive, but as we shared, there may be better spots to gain exposure in the Yen at the moment that do not involve a heavily oversold U.S. Dollar; such as EUR/JPY and GBP/JPY.

- We then looked at USD/CAD, which appears to be a bull trap. While we can see higher-lows on short-term charts, longer-term variations show how we’re basically churning around/below bigger-picture support. A revisit back-up to the zone from 1.2622-1.2672 can open the door for bearish continuation strategies.

- Aussie is putting in the makings of what could be an interesting reversal setup. After topping-out in latter August, AUD/USD has been unable to print a fresh high, and this is showing as the Dollar is putting in some serious break-down. There’s a longer-term zone of resistance in AUD/USD that runs from .7929 up to .8000, and we looked at how we can use price action to try to plot for that next ‘lower-high’ in the pair.

- We then looked at setups around the Yen. We had previously looked at these pairs under a similar light three weeks ago, and since then EUR/JPY is up ~250 pips and GBP/JPY has moved down by 100, and at one point this was as much as 200, as well. We looked at how we could setup each pair, looking at EUR/JPY for ‘risk on’ themes while using GBP/JPY for ‘risk off’ scenarios.

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

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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