FX Price Action Setups in EUR/USD, USD/CAD, NZD/USD and AUD/USD
The US Dollar is bouncing from another test of the trend-line that originated in September, and this comes on the heels of the FOMC minutes release from the November rate decision. Those minutes were released after the conclusion of this webinar, but given that this was on the calendar it was a factor taken into account when looking at USD and related markets.
The US Dollar pulled back from resistance yesterday in response to comments from FOMC Chair, Jerome Powell. The big item of interest was Chair Powell’s take on the Fed’s proximity to the neutral rate. In early October (October 3rd to be exact), he had said that the bank was ‘a long way’ from this level. But –when he spoke yesterday, he said the bank was ‘just under’ this rate. While this is a very subjective interpretation, there is a noticeable difference, and the apparent shift is a more dovish take at the world’s largest Central Bank in response to rising risks in the global backdrop. Meanwhile, items around the Italian budget, Brexit and Trade Wars remain in the headlines, and this weekend brings a G20 meeting that should see President Donald Trump speak with Chinese President, Xi Jinping. In this webinar, I looked at price action setups around the US Dollar and finished by looking at Gold, Oil and US equity markets.
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US Dollar Drops to Trend-Line Resistance After Powell Comments
Yesterday saw a quick move develop in both USD-pairs and US equities, and this came-in with a speech from FOMC Chair Jerome Powell at the Economic Club of New York. The difference was subtle but it was there, as Mr. Powell displayed a more sensitive tonality towards the bank’s proximity to the neutral rate, which is the interest rate that would be neither stimulative nor restrictive. On October 3rd, Powell said the neutral rate was ‘a long way’ off. In yesterday’s speech, he said the bank was ‘just under’ this level.
Does this mean the pace of rate hikes will slow? It’s still too early to say, but December looks like a fairly certain rate move: The big question is what happens in 2019, and this may be difficult for the Fed to manage expectations around as there are a series of risks to be encountered before we get into next year.
In the US Dollar, the currency remains bullish as yesterday’s sell-off merely pushed the USD down to trend-line support. This is the same trend-line that had come into play last week and the week before that. The trend-line started around the FOMC’s September rate hike, and connects to the October swing-low.
US Dollar Four-Hour Price Chart: Testing Trend-Line, Channel Support
EUR/USD Holds Resistance at 1.1400 After Recovery Bounce
Yesterday’s rush of USD-weakness provided a reprieve for EUR/USD bulls as the pair finally pushed back above the 1.1300 level. The recovery wasn’t entirely positive, however, at least at this point, as prices remain underneath the 1.1400 handle. If this market was going to bring legitimate bullish reversal possibilities, one might expect a greater show of strength over the past 24 hours. That simply hasn’t happened, and this can keep the door open for short-side approaches. Of interest would be another lower-high within the resistance zone that I’ve been following that runs from 1.1448-1.1500. This area has already produced two resistance reactions this month, and another lower-high, inside of last week’s high of 1.1470, can make short-side setups look attractive again.
EUR/USD Two-Hour Price Chart
GBP/USD Continues with Higher-Lows After BoE’s Brexit Warnings
Yesterday brought an interesting show around the British Pound. Just before Mr. Powell began to speak in New York, Mr. Carney took the stage in London, warning of some pretty nasty items should a No-Deal Brexit develop. The BoE remarked that a worst case scenario could see unemployment as high as 7.5%, with home prices falling by as much as 30% to go along with a move in GBP that could see as much as 25% of its value taken out.
Big numbers, to be sure, and in response GBP/USD moved back down for another trend-line test. This held until Powell’s speech, at which case a rally began to show.
As I had warned in the technical piece on GBP/USD yesterday, this move was too new to chase, and a morning later prices have reverted right back down towards support. For bullish plays, matters can look a lot more attractive upon a break of last week’s resistance at 1.2896-1.2928. On the short-side, prices may need to break the yearly low at the 23.6% Fibonacci retracement of the Brexit move before that door can re-open again.
GBP/USD Weekly Price Chart
USD/CAD Pulls Back From Fibonacci Resistance, Tests Higher-Low Support
USD/CAD has started to pullback from the two month bullish trend after running into a Fibonacci level that’s helped to set the yearly-high. This level was looked at in yesterday’s morning article, and the support zone that I had drawn in on the pair on Tuesday’s webinar is currently helping to hold the lows. This keeps the pair as one of the more attractive long-USD candidates, as a bit of CAD weakness has been helping long-USD strategies in the pair.
USD/CAD Eight-Hour Price Chart
NZD/USD Bullish Break from Falling Wedge
On the short-USD side of the ledger, NZD/USD has been attractive since late-October as the pair began to build in a base of support. From the November open, the pair has put in a strong topside move that’s thrust prices up to fresh five-month-highs, and we’re currently seeing some resistance set-in from a confluent batch of Fibonacci resistance that helped to previously set the November swing-high. This can help to keep the door open for topside continuation strategies, and the Fibonacci level that helped to set a top earlier this month, around RBNZ at .6820, can be re-utilized for higher-low support potential.
NZD/USD Eight-Hour Price Chart
AUD/USD Bulls Get Shy at .7350
The support zone in AUD/USD continues to hold, but after yesterday’s topside ramp another issue has cropped up, and that’s a reticence from buyers around the prior support level of .7350. This can be a difficult area for bullish approaches until bulls prove that they can take this level out.
AUD/USD Daily Price Chart
Chart prepared by James Stanley
To read more:
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--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX