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US Dollar Price Action Setups Ahead of CPI, FOMC Minutes

US Dollar Price Action Setups Ahead of CPI, FOMC Minutes

2018-04-10 19:00:00
James Stanley, Strategist
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In this webinar, we used price action to look at macro markets ahead of tomorrow’s US CPI numbers followed by the release of meeting minutes from the Federal Reserve’s March rate hike. Ahead of these drivers, the US Dollar is weak, continuing the trend that’s been present for more than a year now. The past couple of weeks saw a bit of strength develop in the Greenback, and that was erased around last Friday’s Non-Farm Payrolls report; and USD weakness has continued as a dominant theme since. In this webinar, we looked at setups around the US Dollar.

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S&P 500 Testing Pent Up Resistance

We started off by looking at US equities, as there was a potential late-session move brewing. The S&P 500 pulled back in February, and as we came into March, hope remained that prices would move back to prior highs. That didn’t happen, as sellers came in at the 78.6% Fibonacci retracement of the February sell-off to push prices back down. This ran all the way until early-April, when the 38.2% retracement of the post-Election move came into play at 2554, and since then we’ve seen the build of higher-lows in the index. Meanwhile, resistance remains after multiple tests, and if we do see this area give way, it could lead to a sharp topside break towards 2700.

US Dollar Bears Come Back with Force

Last week ahead of Non-Farm Payrolls we looked at what was a strong US Dollar. The Greenback had risen up to a prior area of resistance around 90.60 and paused as we approached the release. But, when NFP came out to a very disappointing tune, Dollar bears were back with force to push prices back down to 90.00. That weakness has continued this week, and prices are now holding in an area that had produced some support last month as we near the release of March inflation numbers. This keeps the door open for short-side in the Dollar.

EUR/USD Bounces From Support

On the short-side of the US Dollar last week we looked at support in EUR/USD. The pair continues to hold on to the 2017 bullish trend despite last week’s test of trend-line support, and this keeps the door open for bullish continuation. In the webinar, we looked at a shorter-term zone that runs from 1.2335-1.2350, and this is a zone that we’ve been using for a couple of months now while EUR/USD has been range-bound after that 1.2500 test in January. This area had helped to offer resistance last week, and now that price is trading back above this level, it becomes higher-low support potential.

GBP/USD Moving Towards March Highs

On the short-side of USD, Cable has been a bit more attractive of recent. We looked at a support play in the pair last week ahead of NFP, and another support play was setting up yesterday. At this point, price action in GBP/USD is very near those March highs, and this makes the prospect of near-term exposure a bit less attractive. We focused-in on a zone of potential support around 1.4118-1.4125 that could be interesting for higher-low support plays and, if that doesn’t hold, the same area we’d looked at last week around 1.4067-1.4088 could be usable.

USD/CHF – Watch for Bullish Trap

We looked at topside setups in USD/CHF yesterday. And looking at the four-hour or daily charts, that theme would appear attractive, as we have a bit of higher-low support showing around a prior bearish trend-line projection. But going down to shorter-term charts urges caution, as we’ve seen the build of lower-lows and lower-highs. This may need a re-test of the .9500 psychological level before the bigger picture uptrend is ready for resumption.

USD/JPY Carrying Bullish Continuation Potential

We’ve been following the reversal in USD/JPY over the past week, and after last week produced a bullish break of the bearish channel, we started to focus on the higher-lows that began to print in the pair. Another higher-low showed up yesterday, and this came-in right on top of the big zone that we’ve been following that runs from 106.35-106.61. This keeps the door open for a re-test of the 107.90 swing-high that came in in late-February. We noted the lack of a clean setup here along with the wide distance to that prior swing-low. This would make near-term bullish plays in the pair rather unattractive. Instead, we looked to EUR/JPY and GBP/JPY for Yen-weakness.

GBP/JPY Jumps up to 152.00

We’d looked at the long side of GBP/JPY yesterday, seeking out higher-low support in the area that runs from 150.43-150.80. After a visit to the zone, bulls took over to push prices up to fresh two-month highs, and at this point, the point of resistance that we looked at yesterday can now be re-purposed as support. This price comes in at 151.39, and this is the 76.4% retracement of the Brexit-move in the pair.

USD/CAD Breaks Through Support, Time to Flip?

We’ve been following an area of confluent support in USD/CAD that has recently been smashed by sellers. This nixes the topside setup that we were looking at last week, and starts to open the door for short-side setups. We looked at how the four-hour and hourly charts could be used for such a purpose.

To read more:

Are you looking for longer-term analysis on 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 USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

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If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

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

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