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Dollar Pops After Powell Comments: But Can USD Strength Survive?

Dollar Pops After Powell Comments: But Can USD Strength Survive?

James Stanley, Senior Strategist

In this webinar, we used price action to look at macro trends in major currency pairs after today’s rip-higher in the US Dollar. The big question is one of sustainability, as DXY has re-eclipsed the 90.00 level. This area of resistance has previously reversed multiple bullish advances, but given the veracity of this morning’s move combined with the short-term support that showed-up above this level, there is a building case for a continuation of USD-strength. Nonetheless, we retained a balanced posture when looking at various pairs for best options around USD-positioning, as can be evidenced from the various pairs and setups below.

Talking Points:

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Dollar Pops on Powell Testimony – Four Hikes in 2018?

The big item on the morning is a run of USD-strength that took out last week’s high, giving the appearance that bullish continuation may be on the horizon. Just above on the chart, we have potential resistance at 90.57 and 91.00; the latter of which syncs up with the 2017 swing low in DXY.

EUR/USD Runs to Deeper Support – Caution to Bulls

Given this morning’s run of USD-strength, EUR/USD finally broke below the support that had held around 1.2281; pushing prices down towards our ‘s3’ zone of support around 1.2213. Buyers, so far, have shown-up a little above that ‘s3’ level, and short-term price action continues to carry a bearish appeal, indicating that an even deeper move may be in the cards, towards 1.2167 or, perhaps with some time, the 1.2000 psychological level.

GBP/USD Messy Near-Term, Longer-Term Bullish Trend Remains

Also messy on a shorter-term basis, perhaps even more so after this morning is Cable. Short-term strategies can be challenging at the moment given how erratic matters have been on near-term charts, but should some element of higher-low support show around the February lows, the door can be opened for topside strategies. In the webinar, we look at two different ways to play bullish reversals off of recent swing lows.

AUD/USD for USD-Strength Scenarios

For USD-strength, the pair that we’ve been following has been AUD/USD. While the US Dollar remained relatively weak as we walked into February, a bearish reversal had already started to form in AUD/USD. A failure at fresh two-year highs in late-January led into a rather pronounced bearish run in the early part of February, and we looked at re-loading on the short-side in the middle part of the month. This morning’s USD-strength helped the pair move down to fresh near-term lows, and in the webinar, we looked at the prospect of re-entry.

NZD/USD Coming Off of Big Long-Term Resistance

Becoming more interesting on the long side of the US Dollar is NZD/USD. NZD/USD broke-below a longer-term Fibonacci level that’s had a tendency to help produce resistance on the weekly chart. The price is at .7335, and this was the prior swing high on the hourly as bears have started to get a bit more active. We looked at a couple of ways to work with near-term setups in NZD/USD.

USD/CHF for USD-Weakness Strategies

On the other side of the US Dollar we have USD/CHF. Even with today’s Dollar-strength, USD/CHF remains confined around prior resistance, highlighting how a strong Franc has helped to offset a large portion of today’s USD-strength. If USD weakness does come back, this seems to be a pretty smart place to be on the short-side.

To read more:

Are you looking for longer-term analysis on the Euro, the British Pound or the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora of resources on our EUR/USD, GBP/USD, USD/JPY, AUD/USD and U.S. Dollar pages. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

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

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Contact and follow James on Twitter: @JStanleyFX

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

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