US Dollar, EUR/USD, GBP/USD, USD/CHF, NZD/USD Talking Points:
- The US Dollar closed last week with an inverted hammer formation following the failed breakout, keeping the door open for bearish USD price action.
- The fundamental backdrop around the Greenback is messy and there’s a lot of room for projections to run in either direction. The next FOMC rate decision is in September and markets have already geared up for another cut: But will the Fed deliver? And will they commit to additional cuts this time? Or will that be framed as another one-off adjustment? The answer to that question is likely going to be determined by the scope of trade war themes, and that appears to be squarely in-control of one single person that’s made no mystery of their wants for the USD.
US Dollar: Inverted Hammer or Cleanest Shirt in the Dirty Laundry
It’s been a busy week already in the US Dollar. The USD started off by continuing the late-week sell-off on the heels of President Trump’s announcement of additional tariffs on China. This was aided in-part by a surprise re-pricing of the Yuan by the PBoC, raising the stakes in the continued trade war. This triggered a continuation of risk aversion that spelled a nasty outing for stocks to go along with a very weak US Dollar and a very strong Japanese Yen.
There’s been a bit of cessation of those worries so far today, largely on the back of China’s Yuan fix last night. The big question at this point is one of continuation potential, and whether the short-term trend of retracement from risk aversion might continue on to become something more. In this webinar, I looked at a series of setups related to this theme.
US Dollar Inverted Hammer Formation
From a technical basis, a bearish backdrop has started to become easier to justify on the US Dollar after last week’s reversal. As discussed in the long-term USD article published earlier today, last week produced an inverted hammer formation which, when found atop a trend, will often be approached with a bearish backdrop. This is supported from a fundamental perspective by the fact that President Trump, who has sway over fiscal policy, has openly voiced his desire for a weaker USD. This became pertinent last week as the Dollar-strength after the FOMC rate cut was soundly reversed after President Trump’s increased tariff announcement.
US Dollar Weekly Price Chart
Chart prepared by James Stanley; US Dollar on Tradingview
On a shorter-term basis, the fundamental argument would focused on the cessation of worries that showed to start this week, combined with a return of the ‘cleanest shirt in the dirty laundry’ theme. The Fed hasn’t committed to anything at this point, and should trade war themes remain quiet in the near-term, USD strength could creep back up, largely focusing-in on the shorter-term move on the chart.
EUR/USD Bounce Finds Resistance
Similar to the backdrop on USD, differing approaches could be attractive on EUR/USD based on timeframes employed. From a swing perspective, prices found resistance at a key zone that runs from 1.1248-1.1262. This zone had come into play as resistance in the month of May and helped to catch today’s swing-high. Prices on the daily appear to be moving towards the close with a doji or spinning top, and that element of indecision coupled with last week’s lower-low and corresponding bounce can re-open the door for bearish continuation scenarios.
EUR/USD Daily Price Chart
Chart prepared by James Stanley; EUR/USD on Tradingview
GBP/USD Resistance Holds – but Due for a Retracement?
I’ve been focusing on the short-side of GBP/USD and while there’s little for bulls to yet get excited about, bears have started showing a degree of trepidation that may be alluding to a topside swing. This can put focus on the 1.2250 resistance level in looking for that next swing-high.
GBP/USD Daily Price Chart
Chart prepared by James Stanley; GBP/USD on Tradingview
USD/CAD Rips into Resistance Zone – More to Go?
I’ve been following the long side of USD/CAD over the past few weeks, starting with a reversal setup in mid-July that’s continued to show topside run. My final target on the setup is in the 1.3250-1.3300 zone, which has recently started to come into play. At this point, I have no reason to question the bullish trend so I won’t. But, given proximity to resistance, the door may soon open to short side swings should this current run begin to show stall. If it doesn’t – deeper resistance potential is available from the prior support zone of 1.3361-1.3385.
USD/CAD Four-Hour Price Chart
Chart prepared by James Stanley; USD/CAD on Tradingview
USD/JPY Sell-Off Grasps on to Support – More to Go?
USD/JPY spilled lower to start this week. And as risk themes calmed, prices in the pair bounced. But, as shown on shorter-term charts, the more attractive side at the moment may be bullish, looking for a continued short-term retracement back towards 107.50 or, perhaps even, 108.00.
USD/JPY Two-Hour Price Chart
Chart prepared by James Stanley; USD/JPY on Tradingview
USD/CHF Bounces from 2019 Lows – More in Store?
Also on the short-side of the US Dollar I’ve been following USD/CHF. The pair put in a pronounced bearish move last week, finally finding some support around 2019 lows around the .9700 handle. The focus now is on catching the next swing-high, and prior support zones around .9800 and .9850 could re-open the door for such scenarios.
USD/CHF Four-Hour Price Chart
Chart prepared by James Stanley; USD/CHF on Tradingview
AUD/USD Postures Very Near Flash Crash Lows – Bear Trap Potential
Aussie has been smashed over the past few weeks and there isn’t really any evidence that the pain is yet over. From a technical perspective, however, there is a bit of concern as bears have had ample opportunity to break-down to fresh lows, particularly as USD-strength has come back and, yet, it hasn’t happened. So, at this point, the bearish side may be too long-in-the-tooth while the bullish side isn’t necessarily anymore attractive.
AUD/USD Daily Price Chart
Chart prepared by James Stanley; AUD/USD on Tradingview
NZD/USD Digs into Support – Bounce Potential?
Similar to Aussie above, NZD/USD has been mired by an aggressive down-trend, pushing prices down to a key zone of support. The difference between the two setups is the recent historical value of that support, combined with the shorter-term higher-lows that have shown since the .6500 level has come back into play.
NZD/USD Daily Price Chart
Chart prepared by James Stanley; NZD/USD on Tradingview
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
