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US Dollar Price Action Setups: EUR/USD, GBP/USD, USD/JPY, USD/CAD

US Dollar Price Action Setups: EUR/USD, GBP/USD, USD/JPY, USD/CAD

James Stanley, Senior Strategist

US Dollar Price Action Setups:

  • The economic calendar is loaded for the next week with focus already shifting toward the FOMC rate decision next Wednesday.
  • Along the way, however, is a plethora of US data to go along with an ECB rate decision tomorrow.
  • 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.

There’s a looming item on the economic calendar that’s likely already playing a toll on current price action, and that’s the FOMC rate decision scheduled for next Wednesday.

The FOMC is expected to announce the initiation of asset purchase taper in the first actual move towards ‘less loose’ policy since the pandemic began. In September, the Fed began to open the door to rate hikes in 2022 even though they delayed the taper announcement that many were looking for, and this helped the US Dollar to push up to a fresh yearly high before becoming entangled with a big spot of Fibonacci resistance.

A month later, that resistance continues to hold the highs and prices in the Greenback have been pulling back. Last week saw price action spent much of the period griding away in a support zone at prior resistance, taken from the ascending triangle that had brewed ahead of last month’s break. This week started with a quick bounce but buyers have so far been unable to continue the move, which keeps the door open for a deeper pullback in the trend before the bigger-picture move is ready to continue.

To learn more about Fibonacci or the ascending triangle, check out DailyFX Education

US Dollar Daily Price Chart

US Dollar Daily Price Chart

Chart prepared by James Stanley; USD, DXY on Tradingview

EUR/USD Falling Wedge

Tomorrow brings an ECB rate decision and if the US Dollar’s bullish trend is going to get back into order, it’ll likely need some help from the Euro. But can the ECB punch the currency lower at tomorrow’s rate decision? That’s the big question as the pair has slowed its downward momentum as the 1.1500 psychological level has come closer and closer. This is a level that’s had some historical pull on the pair, even functioning as last year’s swing-high as the pandemic was getting priced-in March of last year.

More recently, the pair has continued in a bearish manner, holding below the resistance that I had looked at last week, but sellers seem to be showing reticence around the 1.1500 handle. This has led to the build of a falling wedge formation, often approached with the aim of bullish reversals.

For the formation to trigger buyers will need to push prices through near-term resistance, and with an ECB rate decision on the docket for tomorrow that potential certainly exists.

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

EUR/USD Weekly Price Chart

EURUSD Price Chart

Chart prepared by James Stanley; EURUSD on Tradingview

GBP/USD Bull Flag

Also of interest for bearish USD scenarios, GBP/USD is currently holding resistance in a downward sloping channel which popped up after the prior bullish trend hit a fresh high. This is a bull flag formation, and if prices can breach the 1.3835 resistance, the door can re-open to bullish scenarios.

Until then, the bearish channel and recent trend applies, but a break of 3835 opens the door for a move back up to the 1.4000 handle.

To learn more about the bull flag, check out DailyFX Education

GBP/USD Weekly Price Chart

GBPUSD Price Chart

Chart prepared by James Stanley; GBPUSD on Tradingview

USD/JPY: Potential for Deeper Pullback

At this point, the daily chart of USD/JPY is showing a potential bearish engulfing pattern which, if confirmed, can lead to a deeper pullback in the bullish move. For this to confirm, today’s candle would need to close below yesterday’s open, which plots at 113.69. If today’s candle does not meet that criteria, then there’s no bearish engulf and the pair may actually be more attractive for topside, based on the fact that price action probed the lows of near-term support only to jump thereafter, highlighting near-term bullish continuation potential.

To learn more about the bearish engulfing pattern, check out DailyFX Education

USD/JPY Daily Price Chart

USDJPY Daily Price Chart

Chart prepared by James Stanley; USDJPY on Tradingview

USD/CAD: Watch for Morning Star on Weekly

On the long side of the USD, there is a possible setup brewing in USD/CAD, although this morning’s Bank of Canada rate decision did not appear helpful to that theme.

The pair has been mired with weakness for much of the past year-and-a-half, helped most recently by a Bank of Canada that appears more hawkish than the Fed. That theme caught another shot-in-the-arm at this morning’s BoC rate decision.

The big question here is the follow-through response. From the weekly chart, two of the first three criteria for a morning star formation are there. For the pattern to complete, we’d need this week’s candle to close above 1.2416, at which point there would be a bullish reversal formation on the weekly chart.

To learn more about the morning star formation, check out DailyFX Education

USD/CAD Weekly Price Chart

USDCAD Weekly 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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