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US Dollar Price Action Setups Ahead of ECB, BoJ

US Dollar Price Action Setups Ahead of ECB, BoJ

James Stanley, Senior Strategist

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US Dollar Rally Finds Resistance at 2017 Swing Low

We started off our currency look-in with the US Dollar, as the Greenback has staged a bullish breakout since we last looked at DXY on Thursday. Prices caught a bid last week, and that strength has continued into this week with prices eventually finding a bit of resistance at the 2017 swing-low of 91.01. That resistance has held so far, and the Dollar is pulling back; but given the calendar outlay in the remainder of this week, the potential for USD-strength remains. We looked at this across a variety of setups in today’s webinar in the effort of focusing on the most opportunistic venues for a continuation of such a theme.

US Dollar via ‘DXY’ Four-Hour Chart: Rally Up to Resistance at the 2017 Swing-Low

us dollar daily chart

Chart prepared by James Stanley

USD/JPY Breaks Out, Runs into Fibonacci Resistance

We’ve been following the topside breakout in USD/JPY, and noted yesterday and again this morning how that move had gotten a little too hot a little too quickly. We set out pull back levels earlier this morning around 108.10-108.28, and that potential zone of support remains interesting for topside plays. The Yen will likely remain in the spotlight for the remainder of this week, as the Bank of Japan rate decision on Friday morning sees the bank in a much more friendly back-drop than what we had last month, when Japanese inflation was continuing to gain. Inflation eventually softened, and this should give the Bank of Japan a bit more room to operate in taking a dovish approach at that April rate decision.

EUR/USD Sets Seven-Week Low; Deeper Pull Back in Order?

We looked at a confluent area of support yesterday morning, and prices broke-below that in the afternoon. This opens up the possibility of a deeper correction in the pair, targeting the March low around 1.2167, a prior group of swing-highs around 1.2071-1.2090 or even the 1.2000 psychological level. To date, little support has shown at 1.2000 after this level gave considerable resistance in Q4 of last year.

GBP/USD Reversal Continues: Resistance at Prior Support

We’d looked at the 1.4000 area for support in GBP/USD as we were coming into April, and that led into a robust breakout that eventually printed fresh post-Brexit highs just last week. But that strength could not continue, and as March inflation numbers out of the UK softened, so did that bullish run in the British Pound. Prices have been moving lower ever since, and in GBP/USD we’ve fallen back-below the 1.4000 level. This opens up the possibility of using that prior zone of support from 1.3982-1.4000 for lower-high resistance in looking for bearish continuation in Cable.

NZD/USD For Remaining Range-Fill Potential

This was the pair that we were focusing on for USD-strength last week, and the background here is a range that’s been alive in the pair for almost two full years now, going back to the summer of 2016. We’ve been following prices in the resistance side of that range for the bulk of Q1 and moving into Q2, and last Thursday we looked at entry triggers into the move, as short-term momentum was taking on a bearish tonality to mesh with the range on the longer-term weekly chart.

NZD/USD remains attractive for USD-strength scenarios, targeting the psychological level of .7000 before range support might come into play around .6870.

AUD/USD

AUD/USD has also put in a respectable break-down over the past three trading days, falling below a key Fibonacci level at .7648 and a bullish trend-line along the way. This opens the possibility of lower-high resistance around that .7650 level, looking for a longer-term move down towards the .7500 swing low that had reversed prices in December of last year.

EUR/JPY for Yen-Weakness Strategies

As we looked at in USD/JPY, the Yen has potential for a continuation of weakness, particularly as we move towards a BoJ rate decision in which the bank won’t find themselves in such a defensive position. While USD-strength may be suspect, given the shorter-term nature of the observation in consideration of the year-long down-trend that’s been in-place. But there may be greener pastures elsewhere for themes of Yen weakness, and we looked at the topside of EUR/JPY as one of those candidates. The pair remains above the key zone of support that runs from 131.43-132.05, and this keeps the long side of the pair attractive until something changes.

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.

Forex Trading Resources

DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

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

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