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

US Dollar Talking Points:

• The US Dollar finished last week with a bearish engulfing candlestick. So far this week, the weakness has continued with sellers pushing below the 101.80 Fibonacci level.
• EUR/USD remains a big part of this and while the pair didn’t quite put in a bullish engulf last week, there is prospect of capitulation given the way the daily chart has set up.
• GBP/USD remains more attractive for bearish USD themes, while USD/JPY is more attractive for bullish scenarios. USD/CAD may soon be in that bullish USD camp, as well.

The topic for this week’s webinar is topography matters, speaking to the value of longer-term charts for directional impulse, even for traders executing shorter-term strategies.

In the USD, it’s been a strong trend for the prior four weeks, driven by a FOMC rate hike and a more-hawkish Fed. But a big part of that has been continued sell-off in the Euro despite deep oversold conditions, and that remains a big piece of the puzzle for both USD/DXY and EUR/USD in the days and weeks ahead.

US Dollar Weekly Chart

Chart prepared by James Stanley; data derived from Tradingview

EUR/USD

In last week’s webinar, the topic was ‘capitulation’ along with ‘two ways to trade a turn.’ A day after that session we may have seen that in EUR/USD, helped along by a strong US CPI print.

Sellers initially pushed for a fresh yearly low, but they didn’t get very far, and a rally by the end of the day exposed a wide underside wick. The next day, a strong PPI report out of the US was unable to continue that sell-off and, instead, bulls pushed up for a fresh higher-high, which continued through Friday trade.

A pullback showed up to open this week but, so far, buyers have held up support at prior resistance, around the 1.1212 Fibonacci level, and that keeps the door open for bulls to push for a greater recovery and that speaks to the short side of the Dollar looked at above. For next levels, it’s the 1.1265-1.1285 zone sitting overhead that buyers need to push through to exhibit greater control of the matter.

EUR/USD Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

GBP/USD

For USD-weakness I still prefer GBP/USD. The pair put in a strong reversal from a big support level last week and in the webinar, I compared the weekly bar here against EUR/USD to illustrate why Cable is still deserving of that attention.

At this point, resistance is showing at the 23.6% retracement of the same Fibonacci setup from which last week’s support bounced from the 38.2% marker, and in the webinar, I highlighted two support zones to work with for pullback scenarios in the pair.

GBP/USD Daily Price Chart

Chart prepared by James Stanley; data derived from Tradingview

USD/JPY

For USD-strength, I still prefer USD/JPY, with the caveat that I think there’s theoretically capped upside as a push above 160 will probably elicit intervention comments and that may even be true for a poke above 159.00. I talked about this in greater depth yesterday, asking whether the 160.00 level is vulnerable.

USD/JPY Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

USD/CAD

It’s gone from feast to famine for bulls in USD/CAD, as a consistent uptrend has pared back considerably over the past week, following a failure at 1.4300 after the US CPI release.

It’s the 1.4000 level that stands out here, and there’s already been a response from just above that price at 1.4030 which is the 50% mark of the September-October rally. This could be an area of interest for a bounce play, particularly for bullish-USD scenarios.

USD/CAD Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

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