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


  • Tomorrow brings the Fed, and Friday brings NFP. It’ll be a busy remainder of the week across the US Greenback.
  • The Buck put in a robust bullish transfer after the September FOMC charge determination, and tomorrow is anticipated to carry a taper announcement however that already seems to be priced-in. What else can the Fed say to feed USD bulls and can Powell tip his hand in the direction of a extra hawkish outlook within the December Abstract of Financial Projections?
  • The evaluation contained in article depends on worth motion and chart formations. To study extra about worth motion or chart patterns, try our DailyFX Training part.

Tomorrow brings the Fed, and Friday brings Non-farm Payrolls, so we’re within the midst of some heavy drivers for the USD.

It’s lengthy been anticipated that that is the speed determination at which the Fed will announce their intentions to start tapering asset purchases. Many market members have been in search of that announcement on the September charge determination. As an alternative, Powell mentioned that the ‘vital additional progress’ that the financial institution wished to see hadn’t but been met on the employment entrance despite the fact that inflation was sticking above 5%. Powell mentioned the financial institution was able to make that taper announcement quickly offered that employment knowledge didn’t massively disappoint, and international markets largely inferred that to imply ‘November.’

The Fed did, nevertheless, improve their financial projections to focus on a possible charge hike in 2022. Since then charges markets have continued to run and at the moment are nearer to pricing in a second charge hike for subsequent yr. And the expectation for a taper announcement seems to be priced-in at this level, with the focus now shifting to the Fed’s charge hike plans for subsequent yr and whether or not they suppose they’ll must usher in a quicker tempo of hikes to begin stemming inflationary strain.

The US Greenback shot-higher on the again of the September charge determination, dashing as much as a recent yearly excessive and finally discovering resistance on the 38.2% Fibonacci retracement of final yr’s sell-off. This led to some ranging worth motion in early-October, with yet one more try to interrupt out to a recent excessive mid-month, just for costs to slip again to trendline help final week, at a spot that was confluent with the 23.6% retracement of the latest topside transfer.

Friday introduced a giant response to that confluent help as bulls hit the bid and USD put in a bullish engulfing formation. Up to now this week, that bullish development has softened as costs have pulled again to help on the 14.4.% retracement of that very same main transfer.

To study extra about Fibonacci, try DailyFX Training

US Greenback Each day Worth Chart

US Dollar Daily Price Chart

Chart ready by James Stanley; USD, DXY on Tradingview

US Greenback Greater Image

Taking a step again on the chart and we will get some larger reference round present ranges. That 38.2% retracement of final yr’s sell-off held resistance for 3 consecutive weeks till, finally, bears have been capable of push all the way down to a recent month-to-month low. However that’s across the time that confluent help got here into play on Friday, resulting in a robust continuation transfer that just about made the week for the Buck.

Can consumers lastly press by way of this Fibonacci resistance? And what’s going to the Fed must say to make that occur, contemplating {that a} taper announcement already seems to be priced in? Seemingly, the financial institution might want to warn of quicker charge hikes subsequent yr to match the strikes which were exhibiting in US charges, and that might carry some additional bullish worth motion into the combination as markets additional alter to the potential for tightening from the Fed.

However, let’s be clear, with no up to date projections due at tomorrow’s assembly, if that is to indicate it’ll seemingly emanate from innuendo or hints from Chair Powell. The Fed has went out of their technique to help this fairness market run and it appears unlikely that they’d select proper now to all-of-the-sudden pull the rug out from beneath these well-built developments. However as soon as the beginning of tapering is within the rear view, the main target then strikes on to charges and what Powell says on the subject tomorrow will probably be pored over for hints of a more-hawkish FOMC.

US Greenback Weekly Worth Chart

US Dollar Price Chart

Chart ready by James Stanley; USD, DXY on Tradingview

EUR/USD Nonetheless in Falling Wedge

If the US Greenback does put in a bearish reversal, there’s some context to work with that in EUR/USD, the place the pair has been brewing a falling wedge formation for the previous few months.

Falling wedges are sometimes approached with the goal of bullish reversals and may oftentimes present up round a key space of help. As help grows nearer, sellers decelerate and this results in a weaker angle on the help trendline as in comparison with resistance.

The help space is evident, from round 1.1448-1.1500. And over the previous 5 week’s we’ve seen a gentle construct of higher-lows, additional pointing to the potential of a pullback within the bearish development which will flip into extra of a reversal-like setup.

The massive query right here is considered one of pairs choice; and since the Euro has been fairly weak, it will not be the optimum forex to mesh up with a weak US Greenback, not less than within the present context. GBP/USD could also be a bit extra engaging for related goals.

EUR/USD Weekly Chart

EURUSD Price Chart

Chart ready by James Stanley; EURUSD on Tradingview


Maybe extra engaging, not less than from a elementary perspective, might be topside eventualities for GBP/USD, because the UK is one other economic system that’s taking a look at near-term charge hikes.

Whereas the Fed was pretty lackadaisical in the direction of inflation earlier this yr, the BoE has been a bit extra lively, making ready to hike charges in response with markets anticipating earlier hikes out of the Financial institution of England than the Fed.

And from the weekly chart under, whereas EUR/USD above has been harboring a pointy sell-off transfer since earlier this yr, GBP/USD seems to be in a corrective section, exhibiting a bull flag formation. Final week noticed one other resistance inflection at 1.3836, which is confluent with the resistance aspect of that bull flag and costs have since tilted-lower.

This places deal with 1.3575 as potential help, after which the 1.3500 psychological degree comes again into play.

GBP/USD Weekly Worth Chart

GBPUSD Price Chart

Chart ready by James Stanley; GBPUSD on Tradingview


If Powell does excite charges markets tomorrow, there’s one main point of interest that FX merchants will probably be taking a look at and that’ll be the Japanese Yen.

I had talked about this theme shortly after the September charge determination, warning {that a} extra hawkish Fed meant a larger probability of charges markets attending to work, and given the Financial institution of Japan’s 5 years sitting on adverse charges, there was the potential for carry trades to come back again much like what was seen in Q1 of this yr.

USD/JPY and charges can observe pretty properly, with increased charges resulting in extra bullish habits in USD/JPY as merchants try and seize the brand new, increased carry charges as introduced upon by growing charges within the US.

And this may then result in larger bullish habits, which may result in stronger up developments, making for a really symbiotic relationship, if and when it avails itself.

We had a present of that them by way of the primary few weeks of October with USD/JPY leaping as much as a recent three-year-high. Since then, the pair has continued to coil and this has taken on the looks of a falling wedge, which on this case seems to be functioning much like a bull flag formation. That formation began to provide method on Friday because the USD was constructing that bullish engulfing formation, however worth motion has since meandered again into the wedge. A maintain above help at 113.17 retains the door open for the bullish development.

USD/JPY 4-Hour Worth Chart

USDJPY Price Chart

Chart ready by James Stanley; USDJPY on Tradingview

USD/ZAR Highlighting Breakout Potential

There’s been some information on the South African Rand from earlier right this moment, coated by my colleague Richard Snow, and whereas many USD-pairs have slacked off over the previous couple of weeks, the unique pair of USD/ZAR has continued to run with aggressive topside.

Costs at the moment are testing one other new degree round seven month highs, taken from a long-term Fibonacci retracement. From the under chart, you’ll be able to see the makings of an imperfect inverse head and shoulders formation that’s already beginning to give method.

If we find yourself with a robust USD after tomorrow’s FOMC charge determination, the topside of USD/ZAR might be very fascinating because the pair additional recovers from final yr’s losses.

USD/ZAR Each day Worth Chart

USDZAR Price Chart

Chart ready by James Stanley; USDZAR on Tradingview

— Written by James Stanley, Senior Strategist for DailyFX.com

Contact and comply with James on Twitter: @JStanleyFX


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