US Dollar Talking Points:

  • The US Dollar printed a doji final week after working right into a key spot of assist at 103.82, which was the 2017 excessive in DXY.
  • EUR/USD began to check a key spot of assist right this moment, together with an analogous remark in GBP/USD. Commodity currencies have been beset by weak point of late, as illustrated in bullish breakout potential in USD/CAD and bearish breakdown potential in AUD/USD.
  • The evaluation contained in article depends on worth motion and chart formations. To be taught extra about worth motion or chart patterns, take a look at our DailyFX Education part.

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We have however two weeks left within the 12 months and this week, regardless of being the lead-in to the Christmas vacation set for this Sunday, nonetheless has some high-impact US knowledge for merchants to work with. Friday brings the discharge of PCE which is the Fed’s most well-liked inflation gauge. After final week’s FOMC charge choice, the emphasis stays on inflation knowledge as markets attempt to learn simply how far the Fed will hike charges. And the reply to that query is probably going associated to how lengthy inflation stays stubbornly above goal.

While markets had began to price-in attainable charge cuts for subsequent 12 months, there’s been a fast change as Powell didn’t sound very dovish final week and since that charge choice, the S&P 500 has been down whereas selling-off daily since. And actually, we are able to span the weak point in US shares again to the Tuesday earlier than the FOMC, when a robust reversal confirmed in equities on the again of a CPI print. Initially worth motion jumped on the again of that announcement however mere minutes later sellers had went on the assault. Almost per week later and so they’re nonetheless on the prowl within the S&P.

In the US Dollar, nevertheless, issues haven’t been as loud on the reversal entrance. Price bumped into that spot of assist as taken from the 2017 swing excessive at 103.82. I checked out that worth final Wednesday, simply after the Fed. And whereas it hasn’t precisely spurred a massively bullish response but, it did assist to construct a doji for final week’s DXY candle after a robust sell-off pushed costs all the way down to contemporary five-month-lows.

US Dollar Weekly Price Chart

Chart ready by James Stanley; USD, DXY on Tradingview

US Dollar Shorter-Term

When a pattern nears equilibrium, worth will tend to sluggish the trending transfer. This could be exhibited within the type of a wedge, as a assist degree helps to herald patrons that would buffer the run on the lows whereas bears nonetheless proceed to assault at highs or upon exams of resistance. As such, wedges are sometimes tracked with intention of counter-trend worth motion, learn from that exact same deduction that sellers slowing their strategy on the lows might, finally, result in a pullback or presumably a reversal.

From the each day chart of DXY, we are able to see the place there’s really two falling wedges which were in-play, with some run after that assist hit at 103.82 final week. The 105 psychological degree stays as key resistance for now, and above that one other key degree sits at 105.86. This is a spot of support-turned-resistance nevertheless it’s additionally confluent with the top-side of that longer-term falling wedge formation. A break-above that opens the door for USD-strength eventualities into the top of the 12 months.

US Dollar Daily Price Chart


Chart ready by James Stanley; USD, DXY on Tradingview


If USD goes to stage a reversal – it’s in all probability going to want some assist from EUR/USD to make it occur. And the potential of bearish EUR/USD eventualities is there after the bearish engulfing candlestick that printed on ECB Thursday. That transfer had follow-through on Friday with worth motion testing a key spot of confluent assist round 1.0579. This is the 38.2% Fibonacci retracement of the May 2021 -Sept 2022 main transfer and it’s additionally a spot of prior resistance that’s come again in as assist. There’s additionally a trendline projection in right here, taken from the highs in May of 2021 and linked to the February swing-high.

It’s not all free working under that degree, nevertheless, as there’s one other Fibonacci degree at 1.0515 after which the psychological degree at 1.0500. This raises the potential of false draw back breakouts, so for these with a longer-term vantage level, they’re possible going to wish to see costs first check under the 1.0500 large determine earlier than confidently saying that the highest could also be in.

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EUR/USD Daily Chart


Chart ready by James Stanley; EURUSD on Tradingview


Cable carries a really related dynamic as EUR/USD above. Both pairs stay very close to to current highs and carry a backdrop that could possibly be conducive for reversals. But, with that mentioned, there’s additionally an analogous spot of assist that’s held the lows by a few completely different exams already, and would first want to present means for sellers to start to re-take management.

At this level, there’s a spot of assist across the 1.2100 deal with, which is confluent with the 200 day transferring common. If sellers can drive a breach under that, the door opens for a breakdown into the 1.2000 psychological degree. The large query there’s whether or not sellers can do a lot past that time.

GBP/USD Daily Chart


Chart ready by James Stanley; GBPUSD on Tradingview


Aussie held up pretty effectively by the FOMC charge choice final week, printing a doji at resistance on Fed day final Wednesday. The following Thursday noticed a robust sell-off develop and that helped to type a bearish weekly bar on the heels of a doji printing within the prior week.

AUD/USD Weekly Chart


Chart ready by James Stanley; AUDUSD on Tradingview

AUD/USD Shorter-Term

That large outing on Thursday led right into a doji on Friday, which saved the door open for a bounce right into a morning star sample to begin this week. AUD/USD bulls haven’t been in a position to do a lot, nevertheless, and this retains near-term assist lodged just under present worth at .6677. Near-term resistance is enjoying in from a trendline projection taken from late-November and early-December swing-lows.

The subsequent spot of key assist is an space of prior resistance, plotted at .6548.

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AUD/USD Daily Price Chart


Chart ready by James Stanley; AUDUSD on Tradingview


The Canadian Dollar has remained very weak and for USD bulls, USD/CAD could also be one of many extra compelling markets to comply with as oncoming USD-strength could possibly be meshed with an already weak CAD. A fast comparability between DXY and USD/CAD because the center of final month highlights that deviation effectively, as DXY has continued falling at the same time as USD/CAD has remained pretty bullish. And at this level, the identical 1.3700 degree stays as resistance, with short-term assist now displaying at 1.3652 which was beforehand serving to to supply resistance.

This retains the door open for breakout potential though bulls possible wish to focus in on the each day lows. So far, right this moment’s each day candle has held above the swing-low from Friday. And provided that each days had resistance at 1.3700, the failure over a two-day-period shouldn’t be a bullish issue and may hold the door open for a bigger pullback. The subsequent spot of assist on my chart is round 1.3579 after which the 1.3500 psychological degree comes into the image.

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USD/CAD Daily Price Chart


Chart ready by James Stanley; USDCAD on Tradingview

— Written by James Stanley

Contact and comply with James on Twitter: @JStanleyFX

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