U.S. Dollar Price Action Setups: EUR/USD, SPX, Gold, GBP/USD

U.S. Dollar Talking Points:

 

• This webinar extended the prior week’s discussion where I was looking for a pullback in the USD, which could potentially turn into something more. At this point we have the bounce in DXY and there’s an open door for bulls to make a larger mark given a support test at prior resistance.
• That turn is mirrored in EUR/USD as the pair has dipped down to the 1.0800 handle.
• For USD-weakness, I still think that GBP/USD could produce a more attractive backdrop and the pair is currently working on a morning star formation on the daily chart.
• Also in focus for the webinar was the turn in SPX, the $3k breakout in Gold and the age-old trading mantra of ‘know yourself,’ as many of these counter-trend bounces have already stretched quite far. To join next week’s webinar, click here for registration information.

In last week’s webinar ahead of the FOMC rate decision, I was looking for a pullback in both USD and EUR/USD which could potentially turn into something more. A week later, the pullback is in and the question now for both markets is whether the ‘something more’ aspect comes to fruition.

In DXY, resistance has held at the Fibonacci level of 104.38 and the pullback from that has so far held support at prior resistance, at the Fibonacci level at 103.98. There can be a case for support down to around 103.74 and that can keep the door open for USD-strength, although it will likely need a greater push from Euro bears as I’ll look at in a moment.

 

U.S. Dollar Four-Hour Price Chart

Chart prepared by James Stanley; data derived from Tradingview

 

EUR/USD Retrace from Fibo Resistance

 

Going along with that pullback in the USD is a pullback in EUR/USD, with the same Fibonacci level of 1.0943 holding the highs again after last week’s webinar. Price has pushed down to 1.0800 and that’s been the low for the past few days; but if we are going to see those pullbacks extend in either USD and/or EUR/USD, it seems that Euro bears will need to make a push down for a test of the 200-day moving average, currently plotted around 1.0730. I’ve spanned that up to the 1.0750 psychological level to create a support zone, and if the pair gets down there, it’ll be an opportunity for bulls to join in the recent trend. But, if they don’t that’s where the larger turn scenarios become more attractive around the U.S. Dollar.

 

EUR/USD Daily Price Chart

Chart prepared by James Stanley; data derived from Tradingview

 

SPX

 

The theme for this webinar was ‘know who you are as a trader,’ because frankly, there’s never a ‘free trade’ or ‘a for sure setup,’ there’s always going to be risk involved. And after a decisive move, the trader is faced with the possible downsides of either buying a top (or selling a bottom), or trying to be patient and missing an opportunity to join the trend.

There’s also the matter of sentiment, where many people appear to get very bullish after selloffs and very aggressive after rallies. I extrapolated on that topic back in September of 2023, sharing a quote from John Templeton, ‘the time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.’

Well, just a couple weeks ago pessimism was running rampant in U.S. equities as fears of recession had permeated the headlines. Last week produced both an inside bar and a spinning top for SPX, and so far this week, bulls are reversing the prior move. From a short-term basis, however, this can be an incredibly difficult move to chase-higher, and instead, traders can try to be patient by waiting for a pullback and a possible test of support.

The 5750 level is a big spot for SPX as this is both a Fibonacci level and the 200-day moving average, and below that there’s support at 5705 and then 5670.

 

SPX Hourly Price Chart

Chart prepared by James Stanley; data derived from Tradingview

 

Gold

 

Gold exhibits that psychological element of fear of chasing balanced by a fear of missing out. The 3030 level has now held two strong resistance reactions so far this week, and the pullback in between made a fast run at $3k which saw buyers step in early, holding the low above the big figure.

As said in the webinar, I still have no evidence that would make me want to get bearish, but I’d also try to be picking as gold continues to trade above $3k/oz. Given the recent higher-highs and lows, there could be a case for short-term bullish momentum. But, on a bigger picture basis, it’s supports at $2950-$2954 that sticks out – and if a larger pullback does develop, the prior resistance from $2790-$2800.

 

Gold Hourly Price Chart

Chart prepared by James Stanley; data derived from Tradingview

 

GBP/USD

 

I had looked at a similar theme in the Yen article yesterday, but the British Pound continues to show some signs of strength that could make it a more attractive candidate for USD-weakness scenarios than what’s shown in EUR/USD.

GBP/USD is currently working on a non-complete morning star formation, with support at a Fibonacci level plotted at 1.2900. There’s also been multiple tests above the 1.3000 big figure so far while EUR/USD hasn’t shown interest in testing 1.1000 yet. So, if we do see a breakaway bullish rally in either pair, EUR/USD will have to contend with 1.1000 resistance while GBP/USD has already tested above 1.3000.

 

GBP/USD Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

--- written by James Stanley, Senior Strategist