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US Dollar Price Action Setups in EUR/USD, GBP/USD, USD/CAD, AUD/USD

US Dollar Price Action Setups in EUR/USD, GBP/USD, USD/CAD, AUD/USD

2019-07-18 19:00:00
James Stanley, Currency Strategist
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US Dollar Price Action Talking Points:

  • The US Dollar will likely remain in the spotlight for the next couple of weeks as the Fed is expected to cut rates for the first time in a decade at their rate decision later this month.
  • This presents a number of interesting scenarios across USD-major pairs, as looked at in this webinar.
  • DailyFX Forecasts are published on a variety of markets such as Gold, the US Dollar or the Euro and are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

FOMC Cut Now Less than Two Weeks Away

It’s now less than two weeks away. The Federal Reserve is expected to cut rates for the first time in a decade, and there’s a whopping 38% probability of getting 50 basis points of cuts at that next meeting. Perhaps more pressing is the fact that rates markets are fully wound-up for three 25 basis point cuts by the end of this year, which is quite far away from the one cut that the Fed had forecast at their most recent quarterly rate decision in June. All of Gold, US equities and most USD-pairs hang in the balance.

Making matters more difficult for justification of 75 basis points of softening is the fact that the Fed is looking at not-terrible employment and growth numbers. At the NFP release earlier this month, unemployment hung near 50-year lows. In the inflation release that dropped a week later, Core inflation remained at 2.1%, still above the Fed’s target. So – when the bank cuts rates later this month it does so amidst a number of questions. Is the Fed merely attempting to ‘normalize’ rates further after over-tightening this year? Or do they perhaps see a monstrous risk on the horizon, somewhere, that they want to get in-front of? Or is this going to be some element of a new trend, in which the Fed joins pretty much every other major Central Bank on Planet Earth in looking at dovish policy options and a weaker currency?

Answers to those questions will need to wait for the FOMC, and perhaps even deeper into this year when the bank begins to telegraph their next actions. For its part, the US Dollar appears unconvinced that this rate cut will be anything more than a one-off. The theme of weakness that showed-up in the month of June has come into question as bulls have returned in July. As I shared in the webinar, I’m sticking to a short-side bias on USD itself but, as usual, made plans for either scenario.

US Dollar Daily Price Chart

us dollar daily price chart

Chart prepared by James Stanley

EUR/USD Support Grind Ahead of ECB

Next week brings an ECB rate decision ahead of that FOMC meeting the week after. The European Central Bank is expected to cut rates by 10 basis points; but that dovishness out of the ECB isn’t necessarily anything new, so short-squeeze scenarios may remain around the pair near-term. I had written an article on the topic earlier today entitled EUR/USD Price Outlook: Support Grind at 1212 Ahead of ECB, FOMC.

EUR/USD Two-Hour Price Chart

eur usd eur/usd eurusd two hour price chart

Chart prepared by James Stanley

GBP/USD Rallies into Resistance Potential

On the long side of USD, GBP/USD remains of interest. The pair melted down to a fresh multi-year low during yesterday’s trade, eventually finding support around the 1.2400 handle. Prices have since jumped back above the 1.2500 handle. If prices hold resistance in the 1.2500-1.2523 area, the door can remain open for short-side swings. A bit-higher on the chart is another area of potential resistance that was looked at last week that runs from 1.2568-1.2591, and this is confluent with the under-side of the trend-line connecting flash crash lows in October of 2016 and January of 2019.

GBP/USD Two-Hour Price Chart

gbpusd gbp/usd two hour price chart

Chart prepared by James Stanley

AUD/USD – Time to Flip?

I had looked at AUD/USD yesterday, asking the question as to whether or not it was time to flip into bullish strategies after a generally bearish first half of 2019. The pair found support around the prior resistance level at the .7000 big figure, and after forming a morning star formation, prices have since jumped up to fresh two-month highs. In the webinar, I looked at strategy for working with bullish themes in AUD/USD up to the .7185-.7205 area of longer-term resistance.

AUD/USD Four-Hour Price Chart

audusd aud/usd four hour price chart

Chart prepared by James Stanley

USD/CAD: Counter-Trend Potential on Build of Falling Wedge

I’ve been focusing in on the short-side of USD/CAD for the past month, as a weak-USD theme meshed quite well with CAD strength. That theme appears to be nearing a pause as a falling wedge formation has built with sellers showing reticence to testing the 1.3000 big figure. This could open the door for resistance potential around 1.3132 or, perhaps even the 1.3250-1.3300 area on the chart.

USD/CAD Four-Hour Price Chart

usdcad usd/cad price chart

Chart prepared by James Stanley

Oil Prices Crushed Through 55

I’ve written about this one quite a bit this week, first looking at the bear flag formation on Monday. Both targets filled in fairly quickly, and I took another look this morning with aim for fresh lows. Since then, prices have crossed below the 55 level, and there could be scope for more.

WTI Crude Oil Hourly Price Chart

wti crude oil price chart

Chart prepared by James Stanley

Gold Breakout Pushes Towards Six-Year-Highs

I had written about this one yesterday, looking at two possible mannerisms of working with the bullish side of Gold prices. The more aggressive of those looks is now filling in as a topside breakout is making a fast push towards six-year-highs. The door can remain open for upside here in Gold prices.

Gold Hourly Price Chart

gold 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 have a section for each major currency, and we also offer a plethora of resources on Gold or 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

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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