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US Dollar Price Action Setups After CPI-Fueled Pullback

US Dollar Price Action Setups After CPI-Fueled Pullback

James Stanley, Senior Strategist

In this webinar, we looked at price action setups after this morning’s release of April inflation numbers. While inflation remained brisk and above the Fed’s target on both headline and core CPI readings, USD has continued to pullback after running into resistance yesterday. This opens up the potential for bearish strategies, as there’s a building evening star formation on the Daily chart of DXY. We also looked into GBP-markets after this morning’s BoE ‘Super Thursday’ rate decision. At that meeting, the BoE went dovish, and this helped GBP/USD to move back to the support zone that we’ve been watching around 1.3500; keeping the door open for topside reversal setups.

Talking Points:

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US Dollar Pulls Back From Resistance, April CPI Brings Lower-Lows

We looked at resistance in the US Dollar on Tuesday, and that level came into further view yesterday when DXY price action built a doji at that zone. Today’s bearish candle opens up the possibility of an evening star formation on the Daily chart, and this can open the door to short-side setups in USD, looking for the theme that’s been so pronounced over the last year to come back after three weeks of strength. We went down to the hourly chart to look at the continued build of lower-lows and lower-highs, further indicating bearish potential.

US Dollar via ‘DXY’ Daily Chart: Evening Star Reversal Formation Near Resistance

us dollar daily chart

Chart prepared by James Stanley

EUR/USD Finally Breaks Bearish Channel

While US Dollar strength has been taking many by surprise over the past few weeks, EUR/USD has continued in what was a really strong down-ward channel; only breaking over the past 24 hours as USD-weakness has come back into the fray. Nonetheless, it would still be difficult to put this in a bullish scenario until we saw a sustained topside break back-above the 1.2000 psychological level; and at this point, that price of 1.2000 could be an attractive point of resistance for bearish continuation.

EUR/USD Hourly Chart: Euro Breaks the Chain

eurusd hourly chart

Chart prepared by James Stanley

GBP/USD Grinds at Support Around BoE

The Bank of England went dovish at this morning’s Super Thursday rate decision, kicking expectations for a rate hike out to 2019 or thereafter. Previously, at the bank’s last Super Thursday in February, Mark Carney warned that rate hikes would likely happen ‘faster and to a greater extent’ than previously thought. At today’s meeting, Mr. Carney was back to the previous ‘slower and gradual’ verbiage that had become so commonplace after the Brexit referendum.

Despite this overt dovishness, the net result thus far has been another support test in GBP/USD as the pair moved down to test a key area of support again. This can keep the door open to bullish reversal setups, particularly for those looking at USD-weakness strategies; but as I shared, I’m looking for prices to pose a break of the swing-high that showed after this morning’s BoE meeting, coming it at approximately 1.3557-1.3560 to indicate the potential for additional topside.

GBP/USD Daily Chart: Oversold and Holding Key Support Through Dovish BoE

Please add a description for the image.

Chart prepared by James Stanley

AUD/USD Building Morning Star on the Daily Chart

This is another pair showing some interesting reversal potential, and as the contra-setup to the US Dollar’s evening star formation on the daily, we have a morning star on the Daily of AUD/USD. This morning star has also included a break back-above the psychological level of .7000, and this can be used for bullish continuation scenarios in looking for a larger move of strength in the pair.

AUD/USD Daily Chart: Morning Star Brings Prices Back-Above .7500 Big Figure

audusd daily chart

Chart prepared by James Stanley

NZD/USD Continues to Lower-Lows, Lower-Highs

NZD/USD has been our favored long-USD pair and through last night’s RBNZ rate decision, that theme remains. While AUD/USD is displaying some interesting reversal potential, NZD/USD continues to show bearish tonality after last night’s meeting helped the pair to print a fresh low at .6900. This was the initial target to our short-side setup in the pair, and this keeps the door open for bearish continuation in the pair. At this point, a re-test of the .7000 level for lower-high resistance can re-open the door for short-side setups.

NZD/USD Hourly Chart: Bears Remain in Control

nzdusd hourly chart

Chart prepared by James Stanley

USD/JPY Battling at 110.00

We previously looked at this point of resistance in USD/JPY on Tuesday, and after another failed test at this level, prices are pulling back. This would leave longer-term setups in a rather unattractive space until that resistance is broken, but this does open the door to a shorter-term setup, looking to catch support off of the Fibonacci level at 109.20, targeting a re-test of 110.00.

GBP/JPY For Short-GBP Scenarios

I shared my reticence in looking for short-side setups in GBP/USD. The pair remains oversold and at a key area of long-term support. The pair that has been a bit more attractive for bearish British Pound scenarios has been GBP/JPY, and yesterday we looked at setups on both sides of this market: A shorter-term bullish theme along with a longer-term bearish theme. The resistance we were following for substantiation of that bearish theme gave another hit of resistance this morning before GBP-sellers took control, and this keeps the door open for short-side down towards the 145.00 February swing-low.

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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