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US Dollar Price Action Setups Pre-CPI: EUR/USD, USD/JPY, USD/CAD

US Dollar Price Action Setups Pre-CPI: EUR/USD, USD/JPY, USD/CAD

James Stanley, Senior Strategist

US Dollar Talking Points:

  • The US Dollar has continued its bullish move that started last Wednesday on the heels of a comment from FOMC Vice Chair, Richard Clarida.
  • The Clarida comment came in right as the USD was testing support, and that strength held through the Friday NFP report and so far through the weekly open. Tomorrow’s CPI report is the next big item for the USD.
  • The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.

The US Dollar remains bid and the next CPI release is on the docket for tomorrow morning. This could be a big deal as last week saw the USD turn on the basis of a comment from FOMC Vice Chair, Richard Clarida. Clarida sounded much more hawkish than the Jerome Powell that we head a week prior at the July FOMC rate decision. And with Jackson Hole on the calendar for later this month, the focus remains on the Fed for USD flows as traders attempt to anticipate what’s around that next corner.

The ‘less dovish’ remarks from Clarida helped the USD firm from a big area of support: And that move held into the Friday NFP report, which was really strong, all-the-way-around. Prices in the USD jumped higher and so far through this week, that move of strength has continued with the USD now challenging the four-month-high.

To learn more about CPI and how it can impact FX prices, check out DailyFX Education

US Dollar Four-Hour Price Chart

US Dollar Four Hour Price Chart

Chart prepared by James Stanley; USD, DXY on Tradingview

EUR/USD Tests Support at the 2021 Low

On the long side of the USD, EUR/USD has remained active. The pair is now testing a big batch of support that runs from 1.1709-1.1736. This same area caught the lows back in March and, given the response from retail traders observed in IGCS, many appear to be expecting a similar outcome, as the pair is currently showing 65% of retail holders being long in the pair. Given that sentiment is often approached in a contrarian manner, this can keep the door open for breakdown potential in EUR/USD.

EUR/USD Daily Price Chart

EURUSD Daily Price Chart

Chart prepared by James Stanley; EURUSD on Tradingview

USD/JPY: Break, Pullback, Go

Also of interest on the long side of the USD, USD/JPY has continued its bullish move, and this comes on the heels of a pretty interesting setup that showed last week. I had talked about that setup in the Analyst Pick on the Japanese Yen, and that setup has filled-in a bit so far this week.

The 110 area was of interest as it was a confluent spot of resistance. Prices broke above that level last week in USD/JPY while also breaching the topside of a falling wedge, which is often approached with the aim of bullish breakout potential. After that breakout took hold last week, prices started this week with a pullback, finding support at prior resistance. And after a quick test of the 110 psychological level, bulls have hit the bid, helping prices to push higher and keeping the door open for further higher-highs.

To learn more about the falling wedge orpsychological levels, check out DailyFX Education

USD/JPY Four-Hour Price Chart

USDJPY Four Hour Price Chart

Chart prepared by James Stanley; USDJPY on Tradingview

USD/CAD Holding in a Big Spot

USD/CAD remains of interest, as well, as price action is holding within a big spot on the chart. The current spot of support appears to plot around the 1.2500 psychological level. Invalidation could be followed at either the 1.2500 spot or, a bit deeper, around the prior swing low plotted at 1.2423. Atop current price action, it’s the 1.2622 Fibonacci level that looms large, after which 1.2652 and 1.2800 also hold some element of interest for topside approaches.

USD/CAD Daily Price Chart

USDCAD Daily Price Chart

Chart prepared by James Stanley; USDCAD on Tradingview

--- Written by James Stanley, Senior 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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