Post FOMC, ECB, BoE Price Action Setups
The U.S. Dollar put in a notably bearish move after yesterday’s FOMC rate decision, extending the brutal year for the Greenback that’s seen as much as -12.3% of lost value. But – with 2018 just around the corner, what might markets be looking for as we head into the New Year?
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- In this webinar, we used price action to look at major FX markets after the Central Bank entourage over the last couple of days. Yesterday brought the Federal Reserve with the bank’s third rate hike this year. Today brought the Swiss National Bank, the European Central Bank and the Bank of England to the table. This was my final webinar of calendar year 2017, so much of what we looked at was longer-term in nature with focus out towards the beginning of next year.
- The first market we looked at was the U.S. Dollar. USD had moved up to a key area of resistance earlier in the week, and prices started to burst-lower after yesterday’s CPI report. As the Federal Reserve rate hike came in and as Chair Yellen started the accompanying press conferences, prices continued their bearish drive. This keeps near-term price action in the U.S. Dollar in a bearish state, and that prospect of a bullish reversal looks significantly less-likely given this response at resistance. To get bullish – traders would likely want a break of 95.15 before looking in that direction, as that would allow for a break of the bearish channel that’s defined the Dollar’s tone throughout this year.
- We then moved over to EUR/USD. On Tuesday, we looked at the prospect of a near-term higher-low around a key support zone that runs from 1.1685-1.1736. This has been a key zone in EUR/USD for much of the past four months, and after yesterday’s pop off of support, prices began to pull lower around this morning’s ECB rate decision. We drilled down to an hourly chart to look at an instance of prior resistance showing as near-term support, and given proximity to recent swing-lows, this can open the door for bullish plays.
- We then looked at GBP/USD, which is working near a key area of resistance at 1.3477. This is the 50% retracement of the ‘Brexit move’ and over the past couple of months, this has been an interesting level in Cable. This first showed as support for a little over a week in September, but more recently, has become a rather rigid area of resistance. This comes after another test at 1.3320 yesterday, as we had looked at in Market Talk; and for forward-looking stances, traders would likely want some resolution of the recent chop before assigning any directional biases. This means – look for a bullish break of 1.3550 before entertaining trend strategies in GBP/USD.
- We then looked at AUD/USD, which finally took out the remainder of my setup when this morning’s spike hit my trailed break-even stop. As I shared, most interesting was how aggressively Aussie rallied this morning versus European or British counter-parts. This is something I do not want to ignore, so to re-establish shorts, I would need to see some form of a more confirmed element of resistance to open that possibility.
- We then moved over to USD/CAD, which remains in a range. That range is relatively tight with a little over 200 pips between support and resistance, and prices have made a recent run from resistance after a check earlier this week. Prices revisiting support open the door for topside plays.
- USD/JPY is a bit messy. Prices have just entered a key zone that runs from 111.61-112.43, and this can be a daunting area to attempt to establish exposure. More interesting, however, is the longer term range that’s been in-play for seven months now.
- We then looked at EUR/JPY. EUR/JPY has also been range-bound of recent, with support showing from 131.43-132.05 and resistance around 134.41. It appears as though we’re soon going to get another test of support, and this can be an attractive way of adding long Euro exposure against a currency not named the U.S. Dollar.
- GBP/JPY may have some element of higher-low support showing. Previous support showed around the 150.00 psychological level, and it appears as though bulls are trying to cauterize a current low at a higher value, which can open the door to top-side setups.
--- Written by James Stanley, Strategist for DailyFX.com
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