In this webinar, we looked at price action setups around the US Dollar ahead of a large slate of event risk. Tomorrow brings the June FOMC rate decision, and the wide expectation is that we’re going to see the second hike out of the Fed this year. The following morning brings a European Central Bank rate decision, and the big question here is whether we hear the bank lay the initial groundwork to tapering their stimulus program, which is currently set to expire in September. And later that night/Friday morning, we have the Bank of Japan with a rate decision after inflation softened back-below one-percent, which could open the door for a dovish outlay from the BoJ.
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US Dollar Holds Support, Builds Bear Flag After Last Week’s Pullback
The US Dollar has found support at the 23.6% Fibonacci retracement of the recent bullish move, and this can be coupled with a shorter-term observation of a bullish channel building off of the lows. At this point, that bullish channel appears corrective in nature, taking on the appearance of a bear flag formation. Also of note was last week’s evening star pattern on the weekly chart, which could similarly populate interest on the short-side of the US Dollar. Nonetheless, we looked at a balanced approach around the Greenback as we move towards a heightened outlay of risk over the next few trading days.
US Dollar Two-Hour Chart: Bullish Channel From Support
Chart prepared by James Stanley
EUR/USD Bull Pennant, Support at Prior Resistance
We looked at this setup this morning and then again in our Analyst Pick published just a few hours later. EUR/USD broke back-above the key zone of 1.1685-1.1736 after last week’s bullish move, which may have been a short-squeeze. This week saw prices build into a wedge, with support showing from prior resistance, and this made the net of a bull pennant formation. This can be combined with last week’s morning star formation on the weekly chart to open the door to bullish setups in the pair.
GBP/USD Bear Flag – Dual Themes of Risk
The bear flag that we looked at in GBP/USD last week has held, and this helps to put the June spate of strength in the pair into context, as it appears corrective in nature after a really brutal prior seven weeks. The complication with Cable at the moment is the fact that there are multiple drivers of key importance that could continue to swing prices in GBP, and that would be a) tomorrow’s inflation data and b) the Brexit vote. We looked away from GBP/USD until a cleaner setup might present itself.
USD/JPY with Bullish Continuation Potential
This was the bullish-USD side of this morning’s Analyst Pick, and this is looking for near-term momentum to continue higher. The level of 109.19 continues to elicit interest in the pair, and last week saw a swing-low develop around this level. Prices have since re-claimed the 110.00 psychological level, and this opened the door to an attractive risk-reward on the long side, looking for prices to re-test the May high ahead of a potential bullish breakout.
USD/CHF Tonality Has Changed – Watch for Resistance Tests
With a spate of USD-strength showing as we started our webinar, we started to look at playing fades. One of the more attractive venues for such a theme could be sought out in USD/CHF. USD/CHF was in a hard bearish trend as we came into 2018, catching in February and then putting in a very visible reversal. From mid-April into May, that topside trend in the pair was incredibly smooth with nary a pullback; and since failing to hold above the parity level, that theme of consistent strength has become consistent weakness. We looked at the prospect of using short-term resistance tests to work-in to a short-side setup in the pair.
USD/CHF Four-Hour Chart: Bearish Potential
Chart prepared by James Stanley
AUD/USD Gets Messy
This was one of our short-USD candidates last week, and that potential remains. Near-term price action, however, has gotten a bit messy, and we looked away from AUD/USD given this less decisive back-drop. Bullish potential remains as long as we’re above .7500.
NZD/USD Tests .7000 as Multi-Year Range Remains
This was the other short-USD candidate from last week, and topside here can remain as attractive with NZD/USD now testing the .7000 big-figure. Bullish strategies could remain favored as long as price respects the June swing-low of .6960.
NZD/USD Weekly Chart: Two-Year Range Remains
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.
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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.
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--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX