US Dollar for This Week: EUR/USD, USD/JPY, GBP/USD

US Dollar Technical Analysis:

• Last week could’ve been much worse for the USD given the below-expected CPI and PPI prints, but so far it’s held support at prior resistance.
• USD/JPY retains bullish breakout potential and that’s probably one of the more attractive bullish majors for the USD this week, while GBP/USD retains bullish potential itself setting up as one of the more attractive for USD-weakness.
• The big part of the DXY basket is in view this week with the ECB rate decision and EUR/USD has seen the sell-off stall over the past few weeks, with 1.1500 as a major barrier level on pullback scenarios.

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USD

Last week was one of those episodes where it could’ve went very differently for the US Dollar, as below-expected CPI and PPI highlighted less urgency for the rate hikes that have been priced in for later this year.

That has not come to pass, however, as the Tuesday and Wednesday pullback led to a rally in the Greenback, and so far this week, that move has continued. From the weekly chart below we can see the DXY basket holding support at prior resistance and this again points to bullish technical structure.

For this week, the big item is the European Central Bank rate decision and the EUR/USD pair remains in an unsettled place, as the bearish trend and fresh lows have been on pause for the past few weeks, but buyers have seemingly been unable to prod for re-test of the 1.1500 handle. That will likely be the big driver for the USD for this week.

US Dollar Weekly Price Chart

Chart prepared by James Stanley; data derived from Tradingview

EUR/USD

In last week’s USD webinar, I looked at three different resistance areas in EUR/USD, and so far the most nearby has held the highs at 1.1469. But the bigger question is whether there’s now enough motivation from bears to finally break through to a fresh low, as that’s been the lacking component going back to late-June and while the daily chart looks messy, the weekly chart highlights this well. This is why we have the old saying in charting of ‘when in doubt, zoom out.’

EUR/USD Weekly Chart

Chart prepared by James Stanley; data derived from Tradingview

EUR/USD Daily

From the daily chart we can see that counter-trend motive well and while messy, this can be argued as a bear flag type of formation given the bullish counter-trend grind over the past few weeks.

Given the ECB meeting on the calendar, this would seem opportune time for the larger trend to present itself, which would point to further DXY strength as the Euro is a whopping 57.6% of the DXY basket. The next resistance level up, the price that bulls have not wanted to encroach upon yet since breaking below a moth ago, is at the 1.1500 level.

EUR/USD Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

USD/JPY

The Japanese Yen is the second largest component of the DXY basket and the Japanese Yen weakness theme remains as a big part of the relative strength in the USD. At this point, the USD/JPY pair holds an ascending triangle formation, which is a bullish breakout formation that points to the possibility of topside breakouts and trend continuation.

As looked at last week, the 165 level is the next major level up and that’s a price that hasn’t traded in USD/JPY since 1986. But – central to that bullish reaction in DXY after PPI and CPI was a similar outing in USD/JPY, and I had looked at this possibility on Monday, highlighting that trend traders could view that weakness as opportunity, which so far they have.

USD/JPY Daily Price Chart

Chart prepared by James Stanley; data derived from Tradingview

GBP/USD

While the EUR/USD sell-off has stalled over the past few weeks but the pair showing an inability to climb above 1.1500, GBP/USD has sprung into what could be argued as a bullish trend given a recent higher-high.

I looked into the pair last week and highlighted three support areas. The first of those areas has so far helped to hold the lows around 1.3450. The second, just below, spans from a Fibonacci level at 1.3390 up to 1.3400, and the third is a prior swing around 1.3325.

For those looking to take bearish stances on the USD this stands out as one of the more attractive major pairs currently available.

GBP/USD Daily Price Chart

Chart prepared by James Stanley; data derived from Tradingview

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