The U.S. Dollar remains bid as traders have continued to show-up at higher-low support after the bullish breakout of two weeks ago. How might Forex markets price-in an extended run of USD-strength after the back-breaking down-trend that started the year?
To receive James Stanley’s Analysis directly via email, please sign up here.
- 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.
- We started off by looking at the U.S. Dollar, which has continued to hold higher-low support after the ECB-fueled bullish breakout from two weeks ago. We discussed this situation in greater depth in this morning’s Market Talk article entitled, How Forex Markets Might Respond to a Continuation of USD Strength? Given that the primary culprit of this year’s USD-weakness was a strong Euro (which constitutes over 57% of the DXY index), and with that theme taking a backseat after the October ECB meeting – the door can be opened for further Greenback gains as the bearish move from earlier this year further digests.
- We then moved over to EUR/USD, which continues to show bearish tendencies after the ECB-fueled bearish breakout. Prices spent most of last week trickling-higher, eventually running into the under-side of a support zone that we’d been following that runs from 1.1679-1.1736. But, it was around Non-Farm Payrolls on Friday that price action in EUR/USD gave another check to that prior support, and when sellers came-in to push prices lower this confirmed the level as lower-high resistance. Given the veracity of the prior bullish trend, EUR/USD can pull back as far as the 1.1216 level while still retaining longer-term bullish tendencies. Until then, the door can be opened for short-side exposure. EUR/USD Sentiment is at -1.70 as of this writing, click here to access the IG Client Sentiment Indicator.
- We then looked at USD/JPY, which is still finding resistance around the 114.03 level. This is a Fibonacci level that’s helped to hold the highs in USD/JPY for around six months; but when price action opened this week, a quick test of those highs was met with sellers. This produced a bearish pin bar on the daily chart which would normally be attractive for short-side setups. But, as I shared, this was not a scenario in which I wanted to trade for a bearish reversal in USD/JPY, so that pin bar remained non-actionable. Instead, I want to look for support around 113.00 or, alternatively, let resistance finally break before looking to buy a higher-low. USD/JPY Sentiment is at -1.18 as of this writing, click here to access more.
- We then looked at GBP/USD, which is very messy. We talked about this technical setup in-depth in yesterday’s article entitled, The Cable Congestion Continues. The pair can be difficult to assign a directional bias at the moment, and I want to see a break below 1.2982 or a break above 1.3350 before doing so. GBP/USD Sentiment is at +1.2958, as of this writing.
- We then moved over to AUD/USD. The Analyst Pick for short AUD/USD from two weeks ago remains as active, and we looked at how the near-term range can be utilized with a bigger-picture trend-side bias to look for bearish continuation in the pair.
- USD/CHF is showing a range at the top of the trend. Similar to AUD/USD, we looked at trading the shorter-term range with a longer-term trend-side bias.
- USD/CAD looks interesting on the long side on longer-term charts, but the hourly is showing a bearish setup. I showed want I want to see before taking on long exposure in USD/CAD.
- EUR/JPY is back to support in the zone that runs from 131.71-132.05. This can open the door for topside plays in the pair.
- GBP/JPY is messy. And this is GBP/JPY, which has a tendency to be erratic anyways. Be careful until a clearer trend presents itself.
--- Written by James Stanley, Strategist for DailyFX.com
To receive James Stanley’s analysis directly via email, please SIGN UP HERE
Contact and follow James on Twitter: @JStanleyFX