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FX Price Action Setups in EUR/USD, USD/CNH, USD/CAD and NZD/USD

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FX Price Action Setups in EUR/USD, USD/CNH, USD/CAD and NZD/USD

It’s been a busy week already and tomorrow brings an extra quotient of risk as US markets will be closed for an official day of mourning for former US President, George H.W. Bush. This means that the Jerome Powell semi-annual Humphrey Hawkins testimony that was set to begin on Wednesday has been postponed to a yet-to-be-named date; and the next major USD item on the calendar is Friday’s release of Non-Farm Payrolls data from the month of November.

The equity ramp that showed at the beginning of this week has now been completely faded-out, and prices in the Dow are dipping into territory that had come into play on the heels of Chair Powell’s speech last week. The US Dollar, meanwhile, has put in a bifurcated day of price action as weakness leading into this morning down to a key Fibonacci level has brought buyers back to the bid, and prices are now jumping towards an area of unfilled gap on the chart that runs up to around 97.19. In this webinar, I looked at price action setups around the US Dollar, focusing on major currency pairs in the effort of devising strategy.

Forex Talking Points:

– If you’re looking to improve your trading approach, our Traits of Successful Traders research could help. This is based on research derived from actual results from real traders, and this is available to any trader completely free-of-charge.

– If you’re looking for a primer on the FX market, we can help. To get a ground-up explanation behind the Forex market, please click here to access our New to FX Trading Guide.

If you’d like to sign up for our webinars, we host an event on Tuesday and Thursday, each of which can be accessed from the below links:

Tuesday: Tuesday, 1PM ET

Thursday: Thursday 1PM ET

US Dollar Bounces From Fibonacci Support

The US Dollar gapped-down to start this week’s trade and bears remained fairly-active on the open, continuing to push-lower without allowing that gap to fill-in. This led to a test of the bullish trend-line that’s been at work for the past couple of months yesterday morning, and that bounce also failed to fill-in the gap that remains from 94.04-94.19. Weakness continued to push into this morning, after which the 96.47 Fibonacci support level came back into play.

US Dollar Hourly Price Chart

us dollar hourly chart

Chart prepared by James Stanley

After a few hours of struggle, bulls were able to re-grab control to propel prices back to the 97.00 area. Unfilled gap remains, and the key here is monitoring how deeply bulls can drive. If the swing-high from last week is taken-out at 97.31, the scope for further upside is there, and the door could soon re-open to topside strategies in the US Dollar. If, on the other hand, that gap fills and then sellers hold resistance below this prior swing, the door remains open for short-side strategies, and that could be attractive in venues such as NZD/USD and USD/CNH.

US Dollar Four-Hour Price Chart

us dollar four hour price chart

Chart prepared by James Stanley

EUR/USD Streak of Higher-Lows Nears Trend-Line Resistance

From a number of vantage points, the past month has been relatively quiet in EUR/USD, as the pair has continued to build into a symmetrical wedge pattern.

EUR/USD Four-Hour Price Chart

eurusd four hour price chart

Chart prepared by James Stanley

On a shorter-term basis, the big question is whether bulls can continue to push after bringing-in a series of higher-lows over the past few weeks. Sellers remain active, as shown from last week’s resistance hold at 1.1400. But this week, prices were able to edge above that level, even if by a little bit, and this shows a potential shift in the balance-of-power in the pair, with sellers getting a bit more shy while bulls grow more anticipatory as indicated by higher-low support.

In the webinar, I discuss how to move forward with a formation such as the symmetrical wedge as shown below. Wait for the break to get a directional bias, and then look for a pullback to open the door for exposure potential on continuation strategies.

EUR/USD Two-Hour Price Chart

eurusd two hour price chart

Chart prepared by James Stanley

GBP/USD: Cable Flickers to Fresh Low as Brexit Continues in a Messy Manner

Next week brings the Parliament vote for Theresa May’s Brexit plan, and matters never really looked all that positive there. A blow may have been dealt before the vote ever takes place, and this showed up earlier today when UK Parliament found the government in contempt. So, the vote next week isn’t looking so positive.

As discussed by our own Martin Essex, this opens a series of options, including the potential for a new Prime Minister, which may turn out to be Pound-positive.

Nonetheless, the pair remains in a dangerous spot, as prices quickly set a fresh yearly low before pulling-back above the Fibonacci level that helped to set that support. This can be a difficult move to plot for continuation as prices still remain rather far away from nearby resistance swings.

GBP/USD Four-Hour Price Chart

gbpusd gbp/usd four hour price chart

Chart prepared by James Stanley

USD/CHF Builds Higher Lows with Parity Holding Resistance

I discussed this last week, but the prior theme of USD/CHF weakness doesn’t look as attractive after the support test at .9902 two weeks ago. Bullish breaks above parity could soon re-open the door for topside strategies.

USD/CHF Four-Hour Price Chart

usdchf four hour price chart

Chart prepared by James Stanley

USD/CNH to Two Month Lows as Yuan Reversal Gains Speed

I had looked at this one a month ago, essentially trying to catch a top as USD/CNH neared a key resistance level at 6.9875. It took a few weeks for the setup to show much attraction, but to open this week Yuan-strength has been back in the cards and this has helped to bring both targets into play. The bigger and more important question at this point: Is there more room to run on the downside?

USD/CNH was in a concerted up-trend from April into October, and if this theme does hold there may be more room to run.

USD/CNH Daily Price Chart

usdcnh daily price chart

Chart prepared by James Stanley

USD/CAD Finds Resistance at Prior Support

USD/CAD was in a strong and consistent up-trend leading into this week. The pair gapped-lower to go along with that move in DXY, and prices peeled below the bullish trend-line that’s been in place since the start of Q4. At this point, the zone that I had used for prior support is now helping to show short-term resistance, and this lines up with the under-side of that bullish trend-line. Similar to USD/CHF above, there may be a flip scenario taking place here, although it’s still in the very early stage. The remaining unfilled gap up to last week’s close around 1.3300 would likely need to be filled before short-side setups can become attractive.

USD/CAD Four-Hour Price Chart

usdcad four hour price chart

Chart prepared by James Stanley

NZD/USD Pulls Back from Fresh Five-Month Highs

It’s been a positive Q4 for the Kiwi since a difficult first nine months of the year. The month of October saw a build of support even as the US Dollar was jumping up to fresh yearly highs, and as soon as November opened along with some USD-weakness, NZD/USD was set to fly-higher on the chart. That theme of strength has largely remained since, with a couple of resistance inflections helping to show key areas on the chart. One of those areas that had held the highs on two separate occasions last week remains as support potential, and this runs from around .6870-.6877. In the webinar, I discussed a few options for working with that setup.

NZD/USD Four-Hour Price Chart

nzdusd nzd/usd four hour price chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q4 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX



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Forex

A Complete Lack of a Cohesive Government Blights Sterling

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GBP Forecast: A Complete Lack of a Cohesive Government Blights Sterling

Fundamental Forecast for GBP: Neutral

Sterling (GBP) Talking Points:

  • No Meaningful Vote. No Leadership. No EU Concessions. No Brexit.
  • Year-end market conditions make Sterling positions foolhardy.

The DailyFX Q4GBP Forecast is available to download.

In current market conditions, and with the total lack of a cohesive Brexit plan, trading Sterling is nigh on impossible to recommend from a risk- reward stance, leaving our outlook neutral even though the path of least resistance for the British Pound is pointing lower.

Over the past week, the meaningful vote in Parliament for PM May’s Brexit plan was cancelled, the Prime Minister won a vote of confidence – although 117 of her party voted against her – and her visit to Brussels to ask for more concessions to help solve the Irish backstop impasse were roundly rejected by the EU.

As we stand there are a few scenarios that may play out in the short-term, nearly all damaging for the British Pound. The calls for the PM to resign may be listened to by Theresa May, unlikely but still a possibility – the opposition may call for her to step-down, more likely but the Labour Party is currently divided on its Brexit stance – the EU offers some meaningful concessions to help the bill get through Parliament, again highly unlikely – no agreement and the UK goes to WTO rules, looking possible – and finally another Brexit Referendum, a view now gaining traction and a real possibility. While a second Brexit Referendum, and a likely win for Remain, would boost Sterling, the run-up to this break with democracy will weigh heavily on the British Pound.

In a nutshell – if a Government is unable to lead and inspire confidence, putting a value on its currency is impossible.

GBPUSD Four-Hour Price Chart (October – December 14, 2018)

GBPUSD Four-Hour Price Chart

IG Client Sentiment data show 62.8% of traders are net-long GBPUSD. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests that GBPUSD prices may continue to fall. However, the combination of recent daily and weekly positional changes give us a mixed trading bias.

— Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1

Other Weekly Fundamental Forecasts:

Japanese Yen Forecast – USD/JPY Rate Fails to Test Monthly-High Ahead of Fed Rate Decision

Oil Forecast – Crude Oil Prices Swamped by OPEC Cuts, Global Growth Fears, Fed



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Is Gold Posed to Lose its Luster?

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Is Gold Posed to Lose its Luster?

GOLD PRICE FUNDAMENTAL FORECAST: NEUTRAL

Talking Points:

  • Gold’s recent bullish breakout may come under pressure despite strong safe-haven demand
  • A strong US Dollar notching year-to-date highs to limit further advances in gold
  • Prospect of a Federal Reserve rate hike pause could shoot the precious metal higher

GOLD PRICE FUNDAMENTAL FORECAST: NEUTRAL

Over the last 5 days of trading, XAUUSD declined 0.72% as investors anxious over slowing global growth sent the US Dollar higher. Although risk-off sentiment should send the precious metal higher, gains in the Greenback overpowered bullish bids for gold. A higher US Dollar makes purchasing gold denominated in America’s currency relatively more expensive thus limiting upside.

Looking to next week, focus will shift to the Federal Reserve as markets await the highly anticipated decision by the central bank’s Federal Open Markets Committee on monetary policy. Markets are currently pricing a 77 percent chance that the Fed will raise its benchmark policy interest rate for the fourth time this year according to the futures market implied probability.

In general, Gold has an inverse relationship with interest rates due to the precious metal not yielding any cash flows like debt instruments. Higher rates result in weakened demand for the commodity as alternative assets such as US Treasuries provide a higher rate of return. If the Fed surprises markets and pauses next week or makes any material downward change to the Fed’s dot-plot, gold could ascend quickly on back of lower future interest rate expectations.

Eyes will also closely watch for the release of several key economic indicators out of America next week. If actual results miss expectations, risk-off sentiment should continue and further boost demand for gold. However, fears over a slowing global economy will incite further rotation of capital from stocks to bonds with investors flocking to the safety of US Treasuries.

For a list of global economic events and data releases, check out our real-time Economic Calendar.

As international buying of Uncle Sam’s bonds increases, foreigners must convert their currency into US Dollars. This drives up demand for the Greenback which becomes a headwind for gains in gold due to the inverse relationship between the two assets.

A third key driver to take note of that will determine gold’s next move higher or lower will be the performance of the Chinese Yuan. As the damaged Asian economy continues to experience downward pressure amid worsening economic data due to the ongoing trade war with the United States, the Dollar may appreciate further against its Chinese counterpart.

The importance of USDCNY to gold is seen in their strong negative correlation. Trade talks between the world’s largest economic powerhouses will largely drive returns for the currencies with the CNY benefiting from any progress President Xi can make with President Trump towards de-escalation tension or reaching a deal.

Is Gold Posed to Lose its Luster?

Due to the mixed event risks and waning bullish technical indicators, the forecast for XAU will be neutral over the week of December 17. Take a look at client sentiment for insight on client positioning and trader bearish or bullish biases.

–Written by Rich Dvorak, Junior Analyst for DailyFX

–Follow Rich on Twitter for real time market updates @RichDvorakFX

Other Weekly Fundamental Forecasts:

Japanese Yen Forecast – USD/JPY Rate Fails to Test Monthly-High Ahead of Fed Rate Decision

Oil Forecast – Crude Oil Prices Swamped by OPEC Cuts, Global Growth Fears, Fed

British Pound Forecast – A Complete Lack of a Cohesive Government Blights Sterling

US Dollar Forecast –US Dollar May Rise as the Fed Checks Slide in 2019 Rate Hike Bets



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Euro Shorts in Charge on Tri-break

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EUR/USD Technical Highlights:

  • Triangle finally broke, has Euro rolling downhill
  • November low, Nov ’17 t-line initially targeted
  • Must be cautious once at support, may put in floor

Let us help you. DailyFX has guides ranging from forecasts to trade ideas to education all in one location – DailyFX Trading Guides.

Triangle finally breaks, has Euro rolling downhill

Friday’s breakdown finally put the Euro outside of the triangle it had been forming over the course of the past month. It’s been an anticipated event, but confirmation was needed first before running with a more aggressive short bias.

Looking lower there is support not too far away. First up is the November low at 11215, followed by the lower trend-line extending over from November of last year; resides around roughly 11180. The way EUR/USD has been trading we’ll want to pay close attention to how it reacts once support is met.

The moves over the past few months haven’t been sustained for very long and this could be another unsustainable drive lower. With that in mind, from a tactical standpoint if the Euro starts to turn up from one of the aforementioned levels then it may be best to call it a wrap as a quick counter-trend bounce could develop.

If, however, selling pressure increases and a break below support unfolds, then perhaps a little momentum may kick in towards near 11100 or worse. It seems unlikely we will see too much power given not only the Euro’s behavior in past months but also because there is only about a week left in the year of full market participation before we go into ‘holiday’ mode. However, even as such, watch and follow the price action first.

Traders are generally long EUR/USD, see the IG Client Sentiment page to see how this acts as a contrarian indicator and is supportive of lower prices.

EUR/USD Daily Chart (Levels, lines to watch)

EUR/USD

EUR/USD 4-hr Chart (Triangle broke Friday morning)

EUR/USD

—Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at@PaulRobinsonFX

Other Weekly Fundamental Forecast:

Australian Dollar Forecast – AUD Prices May Fall Into 2019, AUD/CAD at Risk to Reversal Pattern

British Pound Forecast – Seven Weekly Bear Candles Dominate

US Dollar Forecast – Dollar Hits an 18-Month High as Anti-Currency Demand Fights Liquidity

Equity Forecast – Technical Forecast for Dow, S&P 500, FTSE 100, DAX and Nikkei

Oil Forecast –Crude oil may See Light in Tunnel As Oncoming Train

Gold Forecast – Price Rally Pulls Back ahead of FOMC



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