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USD Price Action Setups in FX Majors After the March FOMC Rate Hike

USD Price Action Setups in FX Majors After the March FOMC Rate Hike

2018-03-22 19:30:00
James Stanley, Strategist
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In this webinar, we used price action to look at macro markets after yesterday’s rate hike out of the Federal Reserve. The FOMC hiked rates by 25 basis points while forecasting an additional two hikes in 2018, yet the US Dollar continued to show weakness as we came into this morning. A bounce has since developed off of the March lows, leading to the possibility of some short-term strength in the Greenback. In this webinar, we looked at a series of major pairs such as EUR/USD, GBP/USD and AUD/USD to help produce a balanced stance around the US Dollar.

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US Dollar Rip and Dip on FOMC, Support Shows at March Lows

The big takeaway around the US Dollar from yesterday’s rate hike was a continuation of weakness. The driver appeared to emanate from the dot plot matrix, as the central expectation at the Fed remains for three hikes in 2018. When Mr. Powell alluded to the possibility of four hikes earlier this month, the Dollar perked up to fresh short-term highs. That strength quickly dissipated as ‘tariff talk’ started to show-up, but as we moved into yesterday’s rate decision, DXY was holding above 90.00. That support was taken-out after the release of projections, which included that three-hike expectation for 2018, seemingly pointing to some element of pull on short-term price action around those projections.

GBP/USD Higher-High to Higher-Low?

We’ve been following Cable for short-term bearish stances in the US Dollar, and that setup continued-higher into this morning’s Bank of England rate decision. That rate decision was a bit more hawkish than what was expected, as there were two dissenting votes looking to hike rates at today’s meeting, even though this was a non-Super Thursday rate decision which the BoE hasn’t been very active around of recent. Nonetheless, GBP-weakness has showed in the wake of that announcement, and we looked at a potential area of support for longer-term bullish continuation plays in the pair.

USD/JPY Testing Long-Term Support

We’ve been talking about Yen-strength over the past month and that longer-term support in USD/JPY continues to face tests. While this morning’s run is likely going to be explained by tariffs, risk aversion or US/China relations, the theme of Yen strength has been showing fairly prominently for most of this year. We’ve been following higher rates of inflation as the primary driver, with the Yen being in a Euro-like position as the single currency was bid higher throughout last year, even as the Central Bank remained with ‘pedal to the floor’ levels of accommodation.

EUR/USD Longer-Term Trend Remains Intact

EUR/USD has been pretty sloppy for almost two months now. The pair perched up to a fresh high in January and made another attempt to breakout in mid-February; each of which faltered. Since then, we’ve had a range build-in and price action has been fairly consistent with those levels. The bigger item of attraction, however, is the bullish trend-line from 2017; and this could produce an interesting topside setup in the pair should a re-test come about.

USD/CAD – Timing the Pullback

CAD-weakness was a fairly prominent theme as we came into this week, and USD/CAD has pulled back from fresh nine-month highs after last week’s bullish breakout. At this point, the challenge is trying to find the higher-low, and the Daily chart is currently showing a non-completed Doji. If we do close at a Doji on the daily, the door is open for bullish continuation, initially targeting a re-test of the 1.3000 psychological level.

AUD/USD Digs Out Support Around.7700

AUD/USD has been one of our more attractive areas for USD-strength; as AUD/USD has been fairly weak since late-January, even with the Dollar remaining in its own bearish patterns. This helps to highlight just how incredibly weak the Australian Dollar has been, and for USD-strength scenarios moving-forward, this remains as an attractive venue. The complication at the moment was the build of support around .7700 over the past few days, which gives the appearance that support has set-in. This also complicates risk-reward, and we looked at how we could use a pullback to sell into a continuation of the bearish trend.

NZD/USD Fresh Lows After Resistance Visit

We’ve been following the price of .7335 in NZD/USD as this is the 38.2% retracement of the 2009-2011 major move. Perhaps more interesting is how this price has helped to set resistance on the weekly chart on multiple occasions. Prices found two days of resistance at this level a couple of weeks ago, and this has led into a lower-low that printed yesterday. This keeps the door open for short-side setups in the pair, targeting towards the psychological level of .7000.

USD/CHF Can Cut Both Ways

We looked at USD/CHF from a couple of different angles. Long-term (daily) looks ripe for bullish continuation while shorter-term charts such as the 4-hour and below look more attractive for short-side setups. When in such a position, I wait until the views can coalesce, but for those with a defined bias on either side of the pair, there is a setup that can be worked with.

To read more:

Are you looking for longer-term analysis on Gold prices? Our DailyFX Forecasts for Q1 have a section specifically for Gold. We also offer a plethora of resources on our Gold page, and traders can stay up with near-term positioning via our IG Client Sentiment Indicator.

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

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