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FX Price Action Setups in EUR/USD, GBP/USD, USD/CHF and NZD/USD

The US Dollar continues to consolidate inside of previously established highs and lows, and this plays out in a number of pairs as price action has been compressing in the Greenback over the past month. This leads into what’s expected to be a widely-watched FOMC rate decision next week in which the bank is expected to hike rates for the fourth time this year. The rate hike itself is highly-probable, but the bigger question is how aggressive or passive the bank might be regarding 2019 and 2020 monetary policy. Should the Fed signal a ‘wait-and-see’ approach, this could provide a bearish backdrop for USD to go along with a bullish setup in US stocks. If, on the other hand, the Fed continues to forecast gradual rate hikes into 2019, we may see a continuation of October themes when USD strength continued in a rather prominent manner to go along with a rising wave of equity weakness.

Forex Talking Points:

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US Dollar Consolidation Continues Ahead of Key FOMC Rate Decision

Next Wednesday brings the final FOMC rate decision for 2018, and the bank is widely-expected to hike rates for the fourth time this year. At this point, that hike feels fairly-well baked into price action; and the bigger question is how aggressive the Fed might be towards rate hikes over the next two years. The theatrics around this theme have provoked some volatility in USD of recent, helping the currency to set a lower-high in late-November after a key change in the verbiage from Fed Chair Jerome Powell. That swing-high was tested again earlier this week, at which point bulls slowed down and bears showed-up, helping to push prices back down into the range. This sets up a backdrop with which USD-strength becomes attractive on breaks to fresh highs, above the 97.69 yearly high; while USD-weakness becomes attractive on short-side breaks below 96.47. This is the 23.6% Fibonacci retracement of the 2011-2017 major move, and this level has helped to evoke support on two separate occasions already in December.

US Dollar Four-Hour Price Chart

us dollar usd four hour price chart

Chart prepared by James Stanley

EUR/USD Holds Triangle Resistance After ECB Announces End to QE Bond Purchases

This morning brought a big item to the fray for the Euro, and that was the announcement from the European Central Bank that bond purchases will end this month as part of the QE program that’s been going for four years now, totaling €2.6 Trillion versus the initial expectation for €1 Trillion.

Price action in the Euro has been very tame around this announcement, and this is likely because the ECB did a strong job of telegraphing the move well in-advance and sticking to the plan. The backdrop, however, is not quite so friendly, as this move away from ‘less loose’ policy comes amidst the slowest growth in Europe since 2014, and this goes along with a rise in political volatility as nationalism continues to show more prominently across the European continent.

For its part, EUR/USD is still in the symmetrical triangle that’s been going for more than a month.

EUR/USD Four-Hour Price Chart

eurusd eur/usd four hour price chart

Chart prepared by James Stanley

On a longer-term basis, there are two areas of interest that could soon open the door for directional plays in the pair. On the topside of price action, the same resistance zone that’s been in play for almost two months remains, and that sits from 1.1448-1.1500. And on the underside of price action, the area from 1.1187-1.1212 is derived from two different Fibonacci studies, and a down-side test below this level could open the door for plays towards the 1.1000 psychological level.

EUR/USD Daily Price Chart

eurusd eur/usd daily price chart

Chart prepared by James Stanley

GBP/USD Holds Resistance at Prior Support After May Survives No-Confidence Vote

It’s been an interesting week in the UK. The currency started off the week by breaking down to fresh 18-month lows, finding a bit of support at the 1.2500 psychological level. This happened as Theresa May announced that she was postponing the Brexit vote that was due to be sent to Parliament this week. This led into a no-confidence vote, which she survived at yesterday’s vote, and this keeps an element of consistency at No. 10; but the same issues around Brexit remain.

GBP/USD put in a bounce from the 1.2500 psychological level to find resistance at a key area on the chart. This takes place at 1.2671, and this is the 23.6% Fibonacci retracement of the ‘Brexit move’ that helped to form the yearly-low in August of this year. That resistance has held over the past 24 hours, but bulls aren’t yet showing signs of letting up; so this may be opening the door for a deeper area of resistance around 1.2750.

GBP/USD Four-Hour Price Chart

gbpusd gbp/usd four hour price chart

Chart prepared by James Stanley

AUD/USD Begins Build of Bear Flag

AUD/USD continues to hold support around the big zone from .7185-.7205. But, after the early-December sell-off, this bounce appears to be more of a pause in a pending sell-off rather than a legitimate bullish support setup. The pair is building into what appears to be a bear flag formation, and this can begin to open the door for bearish strategies in the pair.

AUD/USD Four-Hour Price Chart

audusd aud/usd four hour price chart

Chart prepared by James Stanley

NZD/USD Support Potential at .6820 Fibonacci Level

The bullish backdrop remains in NZD/USD; and prices are continuing to hold last week’s pullback and we may not have yet seen the short-term low. There are two ways to re-open the door to bullish strateiges: A topside break of the .6870-.6877; or a pullback to the .6820 Fibonacci level, which can open the door for bullish setups with stops below .6750.

NZD/USD Daily Price Chart

nzdusd nzd/usd daily price chart

Chart prepared by James Stanley

USD/CAD Remains of Interest for Bullish USD Strategies

On the side of USD-strength, USD/CAD remains of interest. Prices are holding above a bullish trend-line that got started in early-October. A group of lower-highs thus far in December may be preluding a deeper pullback, but provided that prices remain above 1.3250, the door for topside setups can remain open.

USD/CAD Four-Hour Price Chart

usdcad usd/cad four hour price chart

Chart prepared by James Stanley

USD/CHF Finds Resistance on Underside of Prior Bullish Trend-Line

USD/CHF may be soon re-opening the door for more weakness. This follows a very respectable hold of resistance at the parity level, which soon led to a break-down to fresh monthly lows. Prices have pulled back off of that swing-low, and at this point there’s a bit of resistance showing on the under-side of the bullish trend-line that connects the lows from October and November. The quandary at the moment is one of stop placement, as risk levels above parity would necessitate a break down to a fresh two-month low, beyond the swing from earlier this week.

USD/CHF Four-Hour Price Chart

usdchf usd/chf four hour 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