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US Dollar Price Action Setups Ahead of a Loaded USD Economic Calendar

US Dollar Price Action Setups Ahead of a Loaded USD Economic Calendar

2018-05-24 19:09:00
James Stanley, Currency Strategist
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In this webinar, we looked at price action setups in the US Dollar after prices continued to pullback from resistance after yesterday’s release of FOMC meeting minutes. Next week brings a number of high-impact data points out of the US that carry varying degrees of pertinence to the US Dollar’s recent topside run. Monday is a holiday, but after that we have high-impact USD data on each day of the week, capped-off by Non-Farm Payrolls on Friday. This is an opportune time for the US Dollar to tip it’s hand towards next direction: We’ve retraced 38.2% of the 2017-2018 down-trend at this point, and a diminishing economic backdrop in both Europe and the UK could support a deeper move of strength.

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US Dollar Shies Away From Confluent Fibonacci Resistance

Short-term, the US Dollar is making lower-lows and lower-highs, opening the prospect of a deeper retracement in the month-long bullish move. But – if we scroll out to four-hour charts, we’ll see the potential for a continuation of higher-highs and higher-lows, adding emphasis to the area that runs from 93.00-93.30 as this was the prior ‘higher-low’. On a longer-term basis, from the Daily and longer, the past month of strength appears corrective in nature. Suffice it to say, the US Dollar continues to display potential for bullish and bearish scenarios.

US Dollar Daily Chart: Testing Key Resistance After a Bullish Past Month of Price Action

us dollar daily chart

Chart prepared by James Stanley

Next week’s economic calendar is loaded with USD items, and this can be an opportune time for the Greenback to show its next direction. Below we’re looking at next week’s economic calendar of high-impact USD items.

DailyFX Economic Calendar – High-Impact USD Items for Next Week

DailyFX Economic Calendar High-Impact USD Items

Chart prepared by James Stanley

EUR/USD Drops into Long-Term Support, and the Selling has Stalled

We were following a zone of support in EUR/USD last year that’s started to come back into play. This is taken from two Fibonacci retracements: The 38.2% marker of the 2014-2017 major move, and the 23.6% marker of the 2008-2017 major move. The area between these two levels of 1.1685-1.1736 did a great job of holding support in August, September and the first part of October last year.

EUR/USD Daily Chart: Back to Familiar Support Zone

eurusd daily chart

Chart prepared by James Stanley

This area wasn’t violated until the ECB’s rate decision in October when the bank extended stimulus into 2018, at which point we caught a quick iteration of resistance under that same zone. Just a couple of weeks after the ECB, a red-hot German GDP report prodded bulls back into the move, and we broke back above the zone: After a couple of support items, bulls took control and pushed prices back up to 1.2500. Now that we’re back, will we get a similar response? We looked at how we can use short-term charts to work with the move, retaining a bearish structure until we break back-above the 1.1825 area.

GBP/USD Similar to EUR/USD but with Less Consistent Support

We have a similarly exasperated bearish move showing in GBP/USD, with buyers coming-in off the area that we looked at earlier in the week. This area runs from 1.3270-1.3321, and so far this has helped to cauterize the lows after what was an aggressive move of continuation. Given that this support is not as well tested as what was looked at above in EUR/USD, the picture for bullish scenarios wouldn’t be quite so bright. I’m looking to retain a bearish bias here until we get a sustained break back-above 1.3500-1.3530. Until then, the door remains open for shorts. Be careful of a deeper retracement before that bearish theme is ready to come back, as this is oversold from a few different vantage points.

GBP/USD Daily Chart: Back to December, 2017 Support Area

gbpusd daily chart

Chart prepared by James Stanley

USD/JPY Breaks Back-Below 110.00 With Risk Aversion-Led Yen Strength

USD/JPY put in a surprisingly consistent bullish move last week, driving up to fresh 2018 highs. This week, however, has been a far different tonality. But – the intermediate-term bullish structure remains here, and the door is open to bullish continuation similar to what we looked at earlier this morning in our Market Talk article. At this stage, I’d want to see some element of strength after what’s been a really fast sell-off so far this morning. While the prospect of Yen-strength remains, other markets may be a bit more amenable for that drive, specifically referring to GBP/JPY and EUR/JPY.

EUR/JPY With Bearish Continuation Potential

While EUR/USD has been in a hard bearish trend, EUR/JPY has started to show the same, rushing down to a fresh low earlier this morning. This would be an interesting way to go about Yen-strength, as the political backdrop in Europe is darkening around the same time risk aversion has been showing from Asia. This would make the short-side of EUR/JPY as an attractive theme, and we looked at how a short-stance can be established given recent technical structure.

GBP/JPY Also with Bearish Continuation Potential

We looked at this setup yesterday, using the 147.03 Fibonacci level to base aggressive short-setups off of, and so far that move has continued down to below our first target of 146.00. The door remains open for more, and we looked at possible continuation strategies, focusing in on the 14.4% retracement of the February sell-off, showing around 146.65.

AUD/USD Bullish Continuation Potential – USD-Weakness Setup

We’ve been following AUD/USD as a short-side USD candidate, and we looked at this two weeks ago as one of our FX setups for the week. While that trade initially wasn’t looking to great, shaving right around the stop within the first couple of days, prices have perked back-up, and the prospect of continued topside remains. The complication here is around .7650-.7680, as this was previously a strong area of support.

NZD/USD with Range Fill Potential

Price action remains in the support side of the longer-term range formation. Given that we’ve just started to test down here, the long side may not yet be ready; but this remains a candidate for short-side USD scenarios.

NZD/USD Weekly Chart: Support Side of Range Beginning to Be Tested

nzdusd weekly chart

Chart prepared by James Stanley

USD/CHF with Reversal Potential

We had looked at this one in this morning’s article, and the door remains open to bearish setups here. USD/CHF exhibited a very clean trend on the way-up, and after battling at the 76.4% retracement of the two-year move, prices have broken back-below parity and continue to carry bearish potential.

USD/CHF Four-Hour Chart

usdchf four hour chart

Chart prepared by James Stanley

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

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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