Pre-FOMC Price Action Setups Across the US Dollar
Tomorrow brings the March rate decision out of the Federal Reserve. There are minimal expectations for any news on rates, and the highlights will likely be the Fed’s comments in regards to the balance sheet and how the bank expects the portfolio to look once runoff completes. This can keep the risk trade on centerstage, along with the US Dollar and, in-turn, major currency pairs.
In this webinar I looked at a variety of setups in FX, Equities and Gold in advance of tomorrow’s FOMC rate decision.
Forex 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 Digs Down to Support, Rides Below Bearish Trend-Line
It’s been a stark contrast in USD price action this month: The US Dollar came into March on a bullish trend that began to scream-higher around the ECB rate decision earlier this month. That topside-pop after the ECB brought a really big level into play at 97.71, which was the 2018 high in DXY. That resistance held the highs and the following day brought out an abysmal headline print for February NFP’s, which helped to bring Dollar-bears into the mix.
Since then, it’s largely been a one-way show of weakness as various supports have come back into play and, seemingly, failed.
US Dollar Two-Hour Price Chart
As shared in the webinar last week and again today, there’s a longer-term pattern of strength that remains in USD; and this near-term scenario of weakness may soon be running out of steam. This could open the door for bullish biases around the Greenback ahead of tomorrow’s FOMC rate decision; looking for support to hold above the 95.82-96.03 area underneath price action to keep the bullish trend-line in order. This could eventually allow for a bullish breakout beyond the 97.71 level, as the ascending triangle formation remains vivid on the Daily DXY chart.
US Dollar Daily Price Chart
EURUSD – Time to Flip?
Around that USD resistance inflection earlier this month, there was another item of interest in the Euro. EURUSD had just tested below a four-month range on the heels of the ECB announcement of a fresh round of TLTRO’s. In the webinar around that event, I pointed out another support level around 1.1186, which has since helped to hold the lows as buyers returned.
Prices have spent much of the time since riding atop a bullish trend-line, as shown below.
EURUSD Two-Hour Price Chart
On a bigger picture basis, the door may soon be re-opening for bearish strategies in the Euro, looking for a re-test of the 1.1200 area in EURUSD. The past couple of trading days have seen a build of resistance around 1.1350-1.1360, which is an area of prior support in the pair. This could open the door for strategies with stops above 1.1425 and targets cast towards 1.1200 to make for fairly attractive risk-reward ratios for Euro bears.
EURUSD Eight-Hour Price Chart
GBPUSD: Will Short-Term Mayhem Lead to Long-Term Strength?
Short-term charts in Cable remain fairly difficult to work with given the erratic, frenetic swings that have continued to show on either side of price action. This week is accented with UK inflation set to be released tomorrow to go along with a BoE rate decision on Thursday. I had discussed this theme in yesterday’s GBPUSD Technical Analysis article.
GBPUSD Two-Hour Price Chart
Traders looking at short-term strategies in the pair will likely want to relegate the approach to swings with relatively tight stops. Otherwise, the more prudent approach appears to be taking a step back to wait for an actual trend to present itself, and the 1.3500 area could be key for such.
GBPUSD Daily Price Chart
USDCAD for Bearish US Dollar Strategies
I looked into this setup in this week’s FX Setups of the Week, and I had mentioned what I was looking for here in last Thursday’s webinar. The resistance zone that held the highs in late January remains workable, and this runs from 1.3361-1.3385. This caught another swing-high after this week’s open, in which prices quickly fell-down to the first targeted zone that runs from 1.3236-1.3259. This keeps the door open for bearish USD strategies ahead of tomorrow’s FOMC; particularly as Oil prices remain relatively strong.
USDCAD Four-Hour Price Chart
USDCNH for Bearish US Dollar Strategies
This is a little longer-term; but the potential remains for those looking at a bigger breakdown in the US Dollar. USDCNH had a stark bullish run for most of last year, eventually topping-out in October-November just shy of the all-time-high. That’s the point that I began to look for reversals in the pair, and since then prices have continued to move lower. Along the way, price action built within a bearish channel that continues to maintain the move. This can keep the door open for further downside in the pair, as looked at in FX Setups of the Week.
USDCNH Daily Price Chart
USDJPY Remains Viable for Bullish USD-Strategies
Despite the US Dollar’s recent setbacks, the Japanese Yen has been even weaker. This is highlighted on the USDJPY chart which has continued to show bullish themes on the four-hour and daily varieties. I’ve been following the topside of the pair for over a month now as a series of bullish breakouts have kept prices moving higher; and that theme will likely remain until price action begins to show signs of breakdown.
USDJPY Eight-Hour Price Chart
NZDUSD Tests a Big Resistance Zone
This one may be viable for USD-strength strategies around tomorrow’s FOMC given the big zone of resistance that’s come back into play. The area that runs from .6870-.6877 has caught multiple inflections in NZDUSD over the past five months; most recently last week when it helped to catch the highs in the pair. Now there’s also a bearish trend-line entering the equation, which can be found by connecting the January and February swing-highs in the pair. This can keep the door open for bearish strategies in NZDUSD ahead of tomorrow’s FOMC rate decision.
NZDUSD Daily Price Chart
Gold Nears Bullish Breakout – Remains Attractive for Bearish USD Themes
Gold prices have continued on a course of recovery over the past two weeks; following an outsized pullback in a very strong bullish move. Support first showed earlier in March around the 1276-1286 area, and this has been followed by a series of higher-highs and lows.
At this point, prices are buckling underneath a big zone of resistance, as discussed earlier today. A bullish breakout beyond that resistance opens the door for another area of resistance around the 1220 area on the chart, which can then keep bullish trend strategies in order in Gold.
Gold Price Four-Hour Chart
S&P 500 2820 of Interest
I looked into stocks in this week’s Technical Forecast for Global Equities, and the two indices that caught my eye were the S&P 500 and the DAX out of Germany. Both have put in firm topside moves so far this week, to the point where both appear overbought near-term.
In the S&P 500, a pullback to find support around the 2820 level can re-open the door for bullish strategies: This is based off of the batch of resistance that held the highs in mid-October, November, December and again in early and mid-March. To date, prices haven’t tested support in that area of previous resistance.
S&P 500 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