In this webinar we looked at the US Dollar from a few different angles while focusing in on a couple of key inflation prints due over the next 24 hours out of Japan and Canada. The big question around the Dollar at the moment is whether a stronger bullish response may follow this week’s burst-higher; but given that we’re seeing a bit of lower-high resistance develop after last week’s fresh three-year low, matters wouldn’t look too positive for a continuation of USD-strength.
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FOMC Minutes Bring Some Volatility
Yesterday’s FOMC minutes produced some workable volatility in the latter-portion of the US session. And initial dip in the Dollar was followed by a fairly strong rip, seeing prices re-eclipse the 90.00 level on DXY. That held into the Euro session, at which point sellers began to show up, and as the US opened for the day that move deepened as DXY prices sunk-down to deeper support around 89.75. There’s another potential support level around 89.58 in DXY, and this can keep the door open to both bullish and bearish strategies around the US Dollar.
EURUSD Catches Resistance at Prior Support
EUR/USD has had an interesting February. The pair opened the month around 1.2500, and quickly sold-off towards 1.2200. Bulls weren’t yet done, and as last week’s USD-weakness was coming-back, EUR/USD made another attempt to take out 1.2500, which also failed. At this point, prices in the pair have run down to a couple of support levels that we’ve been following, and the zone that runs from 1.2335-1.2350 appears to be helping to set some near-term resistance in the pair. This can keep the door open to short-term bearish strategies, with eyes on deeper support before the longer-term bullish trend may be actionable again.
GBP/USD – Look for the Higher Low
Intermediate-term price action remains a bit messy here, but the same thing we were looking at on Tuesday applies. A group of swing-lows has developed between 1.3765-1.3799 in February. This opens up a zone from 1.3800-1.3837 that could be workable for another iteration of higher-low support, which can open the door for bullish setups with targets cast towards 1.3950 or 1.4000.
USD/CHF for USD-Weakness Strategies
USD/CHF has been in a fairly clean trend as Dollar-weakness has continued through the early portion of this year. We’ve been tracking this setup for a little while now, and yesterday’s quick-pop of USD-strength brought upon a resistance test in USD/CHF. This opens the door for short-side setups, and in the webinar, we looked at a way that this could be integrated with current chats given the price action that’s filled in since yesterday.
AUD/USD for USD-Strength Strategies
It can be real difficult to get excited about being long US Dollars right now. The persistently bearish trend has lasted now for more than a year, and each wiggle higher has been met by sellers willing to slam the Greenback back-down towards the lows. Nonetheless, over the past month, a rather strong reversal has begun to show in AUD/USD, and when Dollar-strength actually showed some promise this week, the pair put in a fairly bearish sequence. Price are testing a zone of short-term resistance that runs around the .7850 area, and there’s another area of potential resistance around .7900 that can also keep the door open for bearish exposure in the pair.
Japanese Inflation
We talked about Japanese inflation on Tuesday, and we looked into it again with the print due a few hours after the conclusion of our webinar. The big question is whether inflation is continuing to show strength in Japan. This comes after December produced a 33-month high in CPI growth at one-percent. While this is still far away from the BoJ’s 2% target, it’s still some spectacular gains seen since the beginning of 2017; and it appears that this growth in inflation is causing concern about the BoJ being able to stick to their massive stimulus program.
USD/JPY At Symmetrical Wedge Support
If we do see inflation print above one-percent, we could see the bottom-side of a months’ old symmetrical wedge give way. Price action in USD/JPY has had a very bearish tonality thus far in 2018, and this lasted all the way until support came-in last week off of a trend-lien projection that makes up support on the wedge pattern. Making matters a bit more difficult around this pair is the fact that both currencies and both economies appear to be nearing some state of transition: At the very least, price action around those currencies indicates as such, and this could make positioning strategies a bit more challenging as there are two drivers of interest at the moment. Instead, traders can direct those Yen-strategies elsewhere.
EUR/JPY Threatening Break of Longer-Term Support
We’ve been following the breakdown of a support zone here for the past couple of weeks. EUR/JPY had found quite a bit of support in the zone that runs from 131.40-132.05; but after the past couple of weeks of continually being tested, that support appears to be giving way. We looked at a short-side setup last week, and we looked at the framework for another given a resistance test in the pair.
GBP/JPY – Will the Post-Brexit Trend-Line Hold?
We’ve been following a trend-line here that connects the post-Brexit low to the August, 2017 low; and over the past week we’ve seen a couple of different iterations of resistance off of this line. We looked at how the current setup could be construed in a bearish manner, looking for a resistance test at the psychological level of 150.00 to open the door for stops placed above the swing around 151.00.
To read more:
Are you looking for longer-term analysis on the Euro, the British Pound or the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora of resources on our EUR/USD, GBP/USD, USD/JPY, AUD/USD and U.S. Dollar pages. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.
--- Written by James Stanley, Strategist for DailyFX.com
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