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

I warned about chasing overbought markets at fresh highs last Friday, and that was the mirror image of the argument from late January when we had the USD at its most oversold in years.

In both cases a lack of patience proved costly as the heavy one-sided positioning led to snap back moves. In the USD, the snap back from oversold in January led to the build of the ascending triangle in February – which gave way to bullish breakout and fresh highs in March. The retracement over the past week happened even with markets pricing out FOMC rate cuts and pricing in the possibility of rate hikes – seemingly at odds between the fundamental lean and the technical backdrop.

But as I often say in webinars fundamentals aren’t a perfect push point for price as it’s positioning and actual buying and selling activity that usually plays a larger role. And that may be playing a big role in FX dynamics as USD/JPY remains a crowded long-term trade that could carry repercussions across major FX pairs.

US Dollar

The USD finished last week at fresh highs and overbought readings on the daily chart. The initial pullback from that remained clean, with a  check of support at prior resistance, and a rally that continued through the FOMC meeting on Wednesday. I had looked at that backdrop in the Tuesday webinar, and everything remained fairly clean until Thursday morning.

What changed then was a strong sell-off in USD/JPY and this broke the USD down to a fresh lower-low, and EUR/USD and GBP/USD up to fresh higher-highs.

Similar to late-January, it seemed as though the USD/JPY sell-off caused a swell of USD-weakness that drove rallies in both EUR/USD and Cable.

US Dollar Four-Hour Chart

Chart prepared by James Stanley; data derived from Tradingview

USD Daily

Bulls can’t be completely ruled out at this point, as the ascending triangle on the daily chart remains intact and just as I had looked at in late-February when USD was holding the trendline and resistance remained at 97.94, there’s still an open door for breakouts with the formation still in play.

US Dollar Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

EUR/USD

The mirror image of USD in that last Friday the pair was in oversold territory after breaking below 1.1500 and that’s the opposite of what showed in late-January when EUR/USD was above 1.2000 at its most overbought in multiple years.

That late-January setup is fairly clear, however, as it was largely fueled by the unwind in USD/JPY, which shows how a sell-off in the built-in carry position of USD/JPY led to Dollar-selling elsewhere.

We had a miniature version of that on Thursday, as the decisive sell-off in USD/JPY is what fueled the USD-weakness that drove the EUR/USD bounce. Like the USD above, this can be justified in both directions depending on time frame. From the four-hour below, there’s higher-highs and higher-lows to work with as the pair has gripped back above the 1.1500 handle.

EUR/USD Four-Hour Chart

Chart prepared by James Stanley; data derived from Tradingview

EUR/USD Daily

From the daily, bears can still find justification as we’re seeing prices test resistance around a prior area of support, around the 1.1578 level with another spot of resistance potential overhead at 1.1655.

EUR/USD Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

USD/JPY

USD/JPY was strong into Thursday morning, coming less than 10 pips away from the widely-watched 160.00 level. But as we’ve seen so many times over the past year buyers had little willingness to test above the big figure that was twice-defended by the BoJ in 2024. The sell-off on Thursday stretched all the way down to the 157.50 level, which produced a bounce, and as we go into the weekend a large portion of that loss has already been retraced.

USD/JPY Weekly Chart

Chart prepared by James Stanley; data derived from Tradingview

USD/JPY Lower-High Potential

The test now is whether USD/JPY puts in a lower-high to go along with the lower-low that hit on Thursday. The bullish sequencing that had held so well since February has now been broken and this can be a slight opening of the door for reversal themes if we do see bulls continuing to shy away from a test at the 160.00 handle.

USD/JPY Four-Hour Chart

Chart prepared by James Stanley; data derived from Tradingview

GBP/USD

For USD-weakness, I still like Cable a bit better than EUR/USD above, and given the Thursday DXY sell-off I think we have some additional evidence of how or why that remain a viable thesis. GBP/USD stretched up to a fresh higher-high as USD was selling off and if we do get a larger round of DXY weakness, I think this setup is a bit cleaner than what’s showing in the Euro.

GBP/USD Four-Hour Chart

Chart prepared by James Stanley; data derived from Tradingview

USD/CAD

On the long side of the Dollar I like USD/CAD a bit more than USD/JPY given that 160.00 level sitting overhead. USD/CAD has been range-bound for almost two months now but there does remain a bullish bias given the higher-lows, which can be construed as an ascending triangle formation. And, of late, bulls have been pushing a little more while at resistance which could lead to breakout at some point, which I’ll look at in more granular detail below.

USD/CAD Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

USD/CAD Four-Hour

The four-hour chart shows higher-lows building with the 1.3700 level coming in as support, even as broader DXY selling was underway on Thursday. This further highlights attractiveness for bullish USD scenarios in the pair.

USD/CAD Four-Hour Chart

Chart prepared by James Stanley; data derived from Tradingview

--- written by James Stanley, Senior Market Analyst, Global Macro