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US Dollar Price Action Setups: EUR/USD, GBP/USD, AUD/USD

US Dollar Price Action Setups: EUR/USD, GBP/USD, AUD/USD

2020-08-25 20:00:00
James Stanley, Strategist
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US Dollar Price Action Setups

  • This was a live webinar focusing in on the US Dollar and related currency pairs.
  • While the trend has been fairly clear in USD so far in Q3, more recently that trend has hit turbulence and price action has been showing hints of mean reversion.
  • Has the US Dollar set a short-term bottom? With Jackson Hole coming up later this week, the potential for volatility in the USD is certainly there.
  • This article looks at a variety of candlestick formations to support the analysis: To learn more about technical chart patterns, check out our DailyFX Education section.

US Dollar Probes the Lows as Sellers Lose Motivation

Has the US Dollar set an intermediate-term low? Last week saw the currency tip-toe down to a fresh two year low but curiously bears were absent, and the move flailed out as prices simply pushed back up to the 93.00 handle. While US monetary policy, and fiscal policy and, well, pretty much everything else have been working against the US Dollar’s favor, the world’s reserve currency has already lost more than 5% in the past couple of months.

Earlier today I posted an article on that topic, asking whether USD bears capitulated last week when failing to continue the breakdown. While it can often be simple to expect what’s been happening to continue to happen (for trend-side continuation); there’s also a matter of logic to consider when it comes to FX markets, particularly when dealing with one of the most vital currencies in the global financial system.

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Because currencies are the base of the financial system – the only way to value currencies is with other currencies. This is different than Gold or Oil or the S&P 500 and pretty much any tradeable non-FX market on Earth. But in currencies, if one currency is going to get weaker it will come due to the strength of others. It’s not possible for every currency on Earth to get stronger or weaker at the same time; even if every large economy is printing cash and diluting the monetary system.

For the US Dollar, which is in every major FX pair, this creates an interesting backdrop where trends in other currencies or markets or economies can help to set strategy; and when we’re at a potential inflection point, such as we are with USD, this can create some interesting strategy ideas. In this webinar, I looked at a few of the more popular markets across the FX-space, and finished with Gold. Below, I look into a few of those markets while providing static charts that were used during this webinar broadcast. And if you’d like to join the next webinar, you’re more than welcome to: The link below will get you signed up for the weekly webinars on Tuesday at 1PM ET.

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US Dollar Monthly Price Chart

US Dollar Monthly Price Chart

Chart prepared by James Stanley; USD, DXY on Tradingview

EUR/USD Price Analysis: Can EUR/USD Take Out 1.2000?

Seemingly related to the USD breakdown conundrum is a related question – can EUR/USD take out the vaulted 1.2000 psychological level? While we can’t rule this out, what we do know is that so far bulls aren’t taking the level lightly, as there’ve been multiple instances of prices turning around when getting within 100 pips of the 1.2000 big fig. I had looked at this scenario earlier in August and it remains of interest today.

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EUR/USD Monthly Price Chart

EURUSD Monthly Price Chart

Chart prepared by James Stanley; EUR/USD on Tradingview

GBP/USD: Can Cable Take Out 1.3200?

Also in that article earlier this month, I had lined up GBP/USD for areas of USD-weakness; and this was largely based off of GBP/USD continuing to show support around the 1.3000-1.3019 area on the chart. That zone has now held five support tests since late-July and, more recently, a series of higher-lows has begun to build in, keeping the door open for bullish potential.

GBP/USD Four-Hour Price Chart

GBP/USD Four-Hour Price Chart

Chart prepared by James Stanley; GBP/USD on Tradingview

USD/CAD: Short-Term Range, Breakdown Potential

Also of interest on the short side of the US Dollar is USD/CAD. The pair has built-in a type of descending triangle formation with a fairly strong show of support around the 1.3148 level. Resistance has been coming in at a series of lower-highs over the past month and change; and more recently a short-term range has built-in.

This can keep USD/CAD of interest for strategies of USD-weakness: Should the Greenback break down again around the Jackson Hole Symposium, the descending triangle in USD/CAD could be of interest for bearish continuation scenarios.

USD/CAD Four-Hour Price Chart

USDCAD Four Hour Price Chart

Chart prepared by James Stanley; USD/CAD on Tradingview

AUD/USD Harbors Reversal Potential

Back on the long side of the US Dollar, and AUD/USD can remain of interest. I had written about the pair earlier in the month looking for the same. It hasn’t broken down yet; but it also hasn’t broken out, keeping the door open for bearish scenarios in the pair, particularly if there was that item of capitulation in USD last week.

The item of interest in Aussie is the longer-term rising wedge formation that’s faced turbulence since beginning to re-test the .7185-.7250 area on the chart. And given how the hard bearish trend gave way to an aggressive bullish trend in late-March, that interest is driven by the potential for a very volatile reversal scenario.

AUD/USD Daily Price Chart

AUDUSD AUD/USD Daily Price Chart

Chart prepared by James Stanley; AUD/USD on Tradingview

--- 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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