US Dollar Talking Points:
The US Dollar continues to meander, driving a state of short-term slumber through a number of FX pairs as we trade deeper into Q4. While a variety of themes/threats remain in the headlines that can possibly evoke some volatility, little has yet come to light and it appears as though many markets are waiting on that next big thing, whatever that might be.
Specifically looking at the US Dollar, US data on the economic calendar in the coming days may feed into some movement. Given the outlay last week in which the US currency displayed high sensitivity to ISM prints on Tuesday and Thursday, we’ll likely see considerable attention paid towards these upcoming drivers. Chair Powell speaks a little later this morning (10:30 AM ET) and FOMC meeting minutes from the September rate decision will be released at 2PM ET. Tomorrow brings CPI data for the month of September and given the flat wage growth in Friday’s NFP report, this should be interesting. And then Friday brings consumer sentiment numbers amidst a number of questions revolving around US consumer strength.
Ahead of the drivers the US Dollar remains in the rising wedge pattern that’s been building throughout this year. Last week saw resistance come into play on the first day of Q4, around that ISM manufacturing miss.
US Dollar Daily Price Chart
EUR/USD: Return Trip to Resistance
Over the past couple of mornings I’ve written about an area of resistance in EUR/USD showing at a very interesting spot on the chart. The 1.1000 handle is a major psychological level and just a little above that is a bearish trend-line projection connecting swing highs from June, August and September. That theme caught a bit of run yesterday when EUR/USD tipped down to the 1.0950 level but, as looked at in yesterday’s webinar, it didn’t yet appear attractive for a bearish continuation scenario plotting for fresh lows. And now less than 24 hours later, prices are turning back towards resistance.
EUR/USD Eight-Hour Price Chart
AUD/USD: More Attractive for Bullish USD Themes than EUR/USD
At this point from a technical view, AUD/USD can be seen as more attractive for long-USD strategies than EUR/USD. A similar backdrop of resistance at a key level can be seen but the big difference here is the longer-term nature of the scenario.
AUD/USD plunged down to fresh decade-lows in early-August. Sellers continued to battle but were thrice thwarted after support tests below .6700. That led to an early-September retracement until resistance could play-through inside of the .6900 handle, and since then bears have been back. I’ve walked through this setup on webinars over the past few weeks and that support zone sub-.6700 came back into play in early-October as the US Dollar was driving towards two-year-highs.
Prices in AUD/USD are now back to that key spot on the chart around .6750, and as looked at in yesterday’s webinar, that support zone underneath .6700 appears to be giving way a bit more than what was seen in August.
AUD/USD Eight-Hour Price Chart
GBP/USD: Cable Collects at Support
While there’s a lot to say around Brexit and the impending split between the UK and EU, there’s not much more to say around GBP at the moment. The pair pushed lower earlier this week on the back of some negative comments from Angela Merkel. But, at this stage, three years post-referendum, that’s really nothing new.
What is interesting around the British currency is how those skeptical comments merely elicited a support test at a key area on the chart. That support remains a day later, even after a quick flicker of strength fell short. But a continued hold here keeps the door open for topside reversal potential and this could be one of the more interesting manners of tracking USD-weakness.
GBP/USD Four-Hour Price Chart
USD/CAD Carries Reversal Potential
Also on the side of potential USD-weakness, USD/CAD remains of interest.
Even as USD-weakness was beginning to show last week, USD/CAD jumped above a key area of resistance and has since spent the last week sputtering in a rather tight range. I looked into the pair with the potential for capitulation in yesterday’s webinar, similar to what was seen in a key zone in early-September, and this scenario remains of interest in the near-term.
USD/CAD Eight-Hour Price Chart
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.
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— Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX