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US Dollar Drives to Fresh 2018 High: USD Price Action Setups

In this webinar, I used price action to look at macro markets after what’s become a strong two-week showing in USD. The US Dollar was the center-point for FX, as I looked at each of the major currency pairs in the effort of devising strategy around the currency. As the webinar started, the Dollar still remained below that 97.00 level that was last set in mid-August. As I had warned, prices would likely test this level soon, likely during the webinar itself. This ended up taking place, and the US Dollar is now trading at fresh one-year-highs. The big question, of course, is one of continuation and pair selection, which was central to this webinar.

US Dollar Talking Points:

- If you’re looking to improve your trading approach, our Traits of Successful Traders research could help. This is based on research derived from actual results from real traders, and this is available to any trader completely free-of-charge.

- If you’re looking for a primer on the FX market, we can help. To get a ground-up explanation behind the Forex market, please click here to access our New to FX Trading Guide.

If you’d like to sign up for our webinars, we host an event on Tuesday and Thursday, each of which can be accessed from the below links:

Tuesday: Tuesday, 1PM ET

Thursday: Thursday 1PM ET

US Dollar Trades Up to Fresh Yearly High Past 97.00, Last Hit in June, 2017

The US Dollar has continued what’s become a really strong month of price action, with hastening of that trend over the past two weeks as risk aversion has become a bit more prominent. Coming into this morning, the US Dollar had found resistance just shy of that prior swing high that was set in August around the 96.98 level; but as warned at the outset of the webinar, this level would likely soon be tested. This took place just a few minutes ago, and now that the US Dollar is at fresh highs, the big question is whether more might be in store? Both EUR/USD and GBP/USD have shown this US Dollar strength fairly visibly while AUD/USD and NZD/USD have not; making for a more enticing backdrop to work with USD strength in EUR/USD and GBP/USD.

US Dollar Four-Hour Price Chart: Fresh 2018 Highs as Bullish Trend Hastens Past Two Weeks

us dollar four hour price chart usd

Chart prepared by James Stanley

EUR/USD Nears 2018 Low, Sellers Shy Away

There has been ample motive to support fresh lows in EUR/USD over the past week, yet it hasn’t shown up, at least not yet. This is something that could be a bit disconcerting to EUR/USD bears, as there may be a bit of struggle at that prior low around the 1.1300 handle.

This keeps the door open for working with bearish EUR/USD approaches in two different ways: A retracement move could be sought out to prior support, around the 1.1450-1.1500 zone. Or, alternatively, short-side breakouts can be usable on breaks below the 1.1300 handle.

EUR/USD Four-Hour Price Chart: Tip-Toe to the August Low

eurusd eur/usd four hour price chart

Chart prepared by James Stanley

GBP/USD Moves in for a Big Support Test

Similar to EUR/USD, but perhaps with even strong down-side run has been GBP/USD. I looked at a short setup in the pair last week as prices were just starting to break-below 1.3000, and I looked at the pair again for short-side setups for this week off of the support level at 1.2877. That second setup has not been able to fill in, however, as bears have remained very persistent, selling resistance ahead of tests of prior support, indicating the oversold nature of the move at the moment.

Prices in GBP/USD are also approaching that mid-August low, similar to EUR/USD; but the difference here is one of reference as that GBP/USD support bounce came in at a key Fibonacci level, taken as 23.6% of the 2016-2018 major move. Support showing here again could keep the door open for bullish reversal plays.

Alternatively, lower-high resistance around 1.2877 or bearish breakouts below 1.2650 could open the door for short-side setups.

GBP/USD Four-Hour Price Chart: Showdown at 2018 Low, 23.6% Fibonacci Support Nears

gbpusd gbp/usd four hour price chart

Chart prepared by James Stanley

USD/JPY Still Messy, but Yen Weakness Becoming More Clear

I had looked at USD/JPY largely as a reference chart, as the near-term setup here is fairly messy and non-directional. But, more recently, we’ve seen a push from bulls as prices have pushed up from last week’s lows. A bit of short-term support at prior resistance, combined with a fresh three-week-high keeps the door open for bullish continuation.

This is relevant as JPY-weakness appears to be at least somewhat linked to the global risk trade. With the door wide open for the BoJ to remain the loosest Central Bank in the land, the ‘everything is awesome’ outlook should sync fairly well with Yen-weakness. On the other hand, greater risk aversion or a flight to quality spells further unwind of those prior trends of Yen-weakness, correlating JPY strength to go along with greater market pressure.

This can be voiced in pairs like EUR/JPY, GBP/JPY for those looking for a return of the risk trade.

USD/JPY Hourly Price Chart: Re-Emergence of Higher-Highs, Higher-Lows

usdjpy usd/jpy hourly price chart

Chart prepared by James Stanley

USD/CHF Tests the Resistance Zone

USD/CHF has been in the midst of a rip-roaring run for most of Q4. Prices propelled up to parity last week, and this week has seen bulls push the envelope into a daunting area on the chart that runs from 1.0000 up to 1.0071, which is the 23.6% Fibonacci retracement of the 2016-2018 major move. I’m not quite sure what to do here yet, as this recent test has just gotten started. But depending on the way price reacts, the door could be opened on either side of the trade.

USD/CHF Daily Price Chart: Entering the Resistance Zone

usdchf usd/chf daily price chart

Chart prepared by James Stanley

NZD/USD Moves Deeper into Wedge, Holds Up Surprisingly Well with USD-Strength

Given the run of Dollar-strength that’s showing in EUR/USD and GBP/USD, a trader might be surprised to see NZD/USD showing some element of bullish price action. This was something I had looked into last week, and then again this week around a similar theme in AUD/USD. But – for those looking to fade USD strength, or for those looking to balance out long-USD exposure in a portfolio, the topside of NZD/USD could remain of interest. The big item of importance for bullish themes here would be respect of the prior support swing around .6460. Higher-low support above this level keeps the door open for topside approaches.

NZD/USD Four-Hour Price Chart

nzdusd nzd/usd four hour price chart

Chart prepared by James Stanley

AUD/USD for USD-Reversal Scenarios

I had looked at this one coming into this week for USD-weakness exposure, and AUD/USD has held up fairly well so far this week considering that run of USD-strength. Prices are coming off of a short-term higher-high set earlier this morning, and the continuation of this bullish structure would need to remain supported above yesterday’s swing-low at .7445.

AUD/USD Hourly Price Chart

audusd aud/usd hourly price 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 Q4 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 an abundance 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