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US Dollar Price Action Setups Ahead of US Inflation

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The US Dollar is moving towards the 95.50 resistance that’s now turned around bullish advances on four separate occasions since mid-June. On the other side of US Dollar price action, a bullish trend-line has also been building since mid-June, and this makes for the net of an ascending triangle on the Daily US Dollar Price chart. Will tomorrow’s inflation data be enough to bring a bullish breakout to fresh highs? Inflation has been ticking-higher over the past year, and tomorrow is expected to bring a second consecutive month at 2.9%.

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US Dollar Tests Resistance Ahead of US Inflation

US Dollar strength has continued and DXY is now pushing up against the 95.53 level that’s turned around multiple topside advances over the past couple of months. With tomorrow’s inflation report on the calendar, the potential does exist for the Dollar to finally break out to fresh yearly highs, and above price action we have a batch of possible resistance around the 96.00 handle along with a Fibonacci level at 96.47.

US Dollar via ‘DXY’ Four-Hour Price Chart

us dollar four hour price chart usd

Chart prepared by James Stanley

EUR/USD Break and Go – 1.1500 Support Nearby

Going along with that topside push in USD has been another wave of weakness in EUR/USD. The pair broke below its symmetrical wedge last week, and after a bounce up to resistance at prior trend-line support, bears took over again to push prices back towards 1.1500.

If we do see a USD breakout around tomorrow’s inflation report, bearish breakouts in EUR/USD become attractive below the 1.1500 psychological level. For those that don’t trade breakouts, or don’t like to work with sitting entry orders, letting the level first break to confirm bearish potential, followed by a pullback to resistance at old support, could open the door for bearish trend strategies. This would be a similar example to how price action treated that bullish trend-line over the past week and a half.

EUR/USD Daily Price Chart: Resistance at Prior Trend-Line Support

eurusd eur/usd daily price chart

Chart prepared by James Stanley

GBP/USD with Breakdown Qualities

GBP/USD has yet to find much for support this week, and this follows the dovish rate hike out of the BoE last Thursday. Prices in GBP/USD have moved-lower each day of this week, and it appears as though a bit of support is attempting to build around 1.2850. Despite the deeply oversold nature of the current move, the potential appears to exist for even more downside. The current complication would be one of positioning given the pair’s distance away from any relevant swing highs. We looked at a few areas of relevance for lower-high resistance yesterday, and this could be greatly assisted by a move of USD weakness around tomorrow’s inflation report.

GBP/USD Four-Hour Price Chart

gbpusd gbp/usd four hour price chart

Chart prepared by James Stanley

USD/JPY Trying to Find Footing for Bullish Continuation Approach

We’ve been following this one so far in Q3 as a bullish breakout to start the quarter has pulled back and, for the majority of the past few weeks price action has been reverting back to prior support around the 111.00 handle. We looked at using short-term price action to work with longer-term setups, and a bearish trend-line that’s shown up so far in August can be used to help look for a return of bullish price action.

USD/JPY Four-Hour Price Chart

usdjpy usd/jpy 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 Q1 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 a plethora 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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Asian Stocks Hold Up As Markets Look To Fed, US Dollar Gains Too

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Asian Stocks Talking Points:

  • Stock markets made modest gains to start a new week
  • Hopes for a dovish Fed seem to be lifting the market
  • However, there are numerous potential worries below the surface

Find out what retail foreign exchange investors make of your favorite currency’s chances right now at the DailyFX Sentiment Page

Asian stocks were cautiously higher on Monday as investors looked with hope to this week’s Federal Reserve monetary policy meeting. There is some sense that the US central bank will steer a dovish path into 2019, with perhaps fewer interest rate hikes in prospect than have been seen this year.

Still, there was plenty of caution around too. The Bank of International Settlements said that recent market selloffs may not be an isolated event, with more volatility likely as monetary policy is normalized. The Nikkei 225 managed to gain 0.7% Monday afternoon, with Shanghai and Hong Kong up by 0.1% apiece. The ASX 200 added 1%, with bank stocks leading the way.

The Australian stock benchmark remains under clear pressure on its daily chart but a key short-term support zone between this year’s lass two significant lows continues to hold the bears in check.

ASX 200, Daily Chart

Foreign exchange markets seemed a little gloomier than their equty counterparts, with haven currencies such as the US Dollar and Japanese Yen benefitting at the expense of more clearly growth-linked units. The US Dollar index hovered near 19-month highs.

That Dollar strength took a modest toll on gold, while crude oil prices were hit by worries about likely future demand level. These worries come in the wake of weaker than expected economic numbers from both China and the US in recent weeks.

Monday’s remaining economic data schedule is a little sparsely populated. The final eurozone Consumer Price Index for November is coming up though. Then the focus will move across the Atlantic and on to the house building market. Canadian existing home sales figures are due as is the housing market index from the US National Association of Home Builders.

Resources for Traders

Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.

— Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!



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Australian Dollar Bulls Might Get A Little Help From The Fed

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FOMC may bring AUD/USD Volatility

Fundamental Australian Dollar Forecast: Bullish

  • The US Federal Reserve is likely to dominate AUD/USD trade this week
  • It will give its December policy call on Wednesday
  • Any sign of a more relaxed policy view will continue to support the Aussie, despite that currency’s own utter lack of interest rate support

Find out what retail foreign exchange traders make of the Australian Dollar’s prospects right now, in real time, at the DailyFX Sentiment Page

The Australian Dollar’s revival of fortunes against its US cousin goes on, underpinned as it has been since its November beginnings by two key factors.

The first is hope for a trade rapprochement between Washington and Beijing. China is the prime customer of Australia’s vast raw-material export machine, while the US is an indispensable partner for Canberra on security matters. So, Australia has much to gain from a trade thaw between the two global giants. More indeed than any other third country, arguably.

And no doubt trade headlines, if they come, will move the Aussie this week. But their timing is impossible to predict. Federal Reserve monetary policy meetings meanwhile are timed with scrupulous regularity. One is coming up early on Wednesday, Australian time.

That brings us to the second AUD/USD prop. Much of the pair’s recent vigor has been rooted in the thesis that US rates may not rise as much in 2019 as investors had previously thought. This seems reasonable. Economic uncertainties abound, from Brexit to rising US deficits and clear signs of economic slowdown around the world. Moreover, the Fed has already raised rates eight times from their financial crisis lows. A pause for reflection could be easily justified.

So the Australian Dollar market will likely be stuck like all others while it waits to see what the Fed has to say on Thursday.

It’s certainly worth pointing out that the Australian Dollar will lack interest rate support even if the US central bank does chart a more cautious monetary course into 2019. Aussie futures markets now see no increase to the country’s own record-low, 1.50% Official Cash Rate for at least eighteen months ahead.

Still, if the Fed delivers its expected December rate hike but then suggests it’s going to hold off for a while then AUD/USD will probably hold up and may make further gains.

It’s a bullish forecast this week.

AUD/USD has broken downward channel

Chart Source: IG.com

Resources Australian Dollar for Traders

Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.

— Written by David Cottle, DailyFX Research

Follow David on Twitter @DavidCottleFX or use the Comments section below to get in touch!



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Dow Awaits Fed, FTSE Looks to EU No-Deal Data. CAC to Protests

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Dow Awaits Fed, FTSE Looks to EU No-Deal Data. CAC to Protests

Equity Fundamental Forecast: Bearish

  • Fed to issue rate decision on Wednesday, followed by a press conference with potential to spur the Dow
  • FTSE will look to Brexit and the BOE decision with a watchful eye on events across the channel
  • CAC concerned with protests and reaction from Brussels on budgetary infractions

Global Geopolitical Concerns Weigh

This past week saw a mixed bag of trading days. A trade war breakthrough on Tuesday spurred markets but most gains were forfeited before the close. The latter half of the week erased any earlier gains as the major US indices sold off Friday. The outlook for global equities remains bearish on a lack of upside potential and persistent threats from Brexit, the Italian budget debate and similar concerns arising in France. One area with upside potential is the Fed’s decision on Wednesday.

Dow, S&P 500 Await Fed Decision

The Fed is scheduled for their final rate decision Wednesday. At present CME Fed Funds futures have the probability of a hike at 77.5%. With a hike largely priced in, the real price action will arise from Chairman Powell’s discussion with the press afterwards. The Q&A will allow Mr. Powell to expand upon his view for rate hikes in 2019 and given a series of dovish comments in recent weeks, could make the case for a bullish reaction in US equities.

Learn about the differences between the Dow, Nasdaq, and S&P 500.

CME FedWatch Tool (Chart 1)

CME FedWatch Tool

FTSE 100 Looks to EU’s No-Deal Documents, Bank of England Rate Decision

The FTSE 100 will again await Brexit news. On Wednesday the European Union is scheduled to release documents regarding their preparation for a no-deal Brexit. If their findings are particularly bleak, expect a slump in the FTSE along with the other European indices.

Brexit Impact on GBP: How the Pound Might Move After Parliamentary Vote

The FTSE will also look to the Bank of England. With virtually no chance the bank hikes their interest rate, any reaction will come from commentary on the case for future hikes. Expect this event to be overshadowed by the Brexit news and the Fed.

FTSE 100 Price Chart (2) Daily, Year-to-Date

FTSE 100 Daily Price Chart

CAC 40 Gets Stung

The French equity index will eye the ongoing yellow-vest protests. Already the movement has secured concessions from French President Emmanuel Macron, but the movement’s leaders say the protest will continue into next week. The tax cuts and wage increases offered by President Macron will draw the eye of the European Commission along with the French people.

See the other economic events in the week ahead with our Economic Calendar.

France may now find itself in a position like Italy with an unacceptable budget to GDP ratio and could face the ire of European Commission President Jean-Claude Juncker. The civil unrest and budgetary overspending will undoubtedly weigh on the French index and could spread across the continent as the bloc attempts to reel in its members.

CAC 40 Price Chart (3) Daily, Year-to-Date

CAC 40 Daily Price Chart

Bearish on Equities? Learn some successful bear market trading strategies and techniques.

As with last week, trade wars remain in the picture. There are no scheduled events but talks between US and Chinese officials are ongoing. With that in mind, be wary of trade war developments that could impact your equity positions. There appears to be little upside potential in many equity markets, so the forecast for the week ahead remains bearish.

–Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact Peter on Twitter at @PeterHanksFX

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

Gold Forecast – Is Gold Posed to Lose its Luster?



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