US Dollar Price Action Setups: EUR/USD, USD/JPY
The Dollar has rallied for four days now and is testing trendline resistance, driven by the breakout in USD/JPY. EUR/USD is teetering on the edge of support and GBP/USD has pulled back from recent highs.
Written by
James Stanley
Sr. Strategist
US Dollar Talking Points:
- It’s been a bullish response in the USD after last week’s webinar, when the Dollar was pulling back following CPI data.
- As looked at then, the response to the pullback or counter-trend criteria would be telling for forward-looking trend, and that’s held true across USD/JPY as well with the pair pushing up to fresh 40-year highs.
- To sign up for next week’s webinar, the following link will allow for registration: Click here to register.
This week’s webinar continues nicely from last weeks as the prior week’s theme was responsiveness to counter-trend criteria, and this week shows strong continuation in both USD and USD/JPY bullish trends.
US Dollar Daily Price Chart
Chart prepared by James Stanley; data derived from Tradingview
As looked at coming into this week, the big question around the DXY basket is the Euro, which will see an ECB rate decision on Thursday morning. At this point, EUR/USD clings to a bearish trend but the past few weeks has built a bullish channel, making for a bear flag formation. At the time of the webinar the support side of that formation was being tested around the 1.1402 Fibonacci level. That has since been tested through and the question at this point is whether sellers can run the move into the close of the daily bar, or whether we end up with another higher-low ahead of the rate meeting on Thursday.
EUR/USD Daily Chart
Chart prepared by James Stanley; data derived from Tradingview
USD/JPY
The driving force behind USD flows at the moment is the USD/JPY pair that’s pushed up to fresh 40-year highs. Next week brings a BoJ meeting but the bigger question is whether the Bank of Japan really wants to do what would be needed to narrow the rate discrepancy in the pair. That could bring a big risk to Japanese businesses and that could produce political turmoil for Japanese policymakers, which is at least part of the reason why the breakout has been as forceful as it has been since last October.
Chasing such a move is a challenge. Instead, patience and waiting for pullbacks so that the trend can re-assert itself, such as what was looked at in last week’s webinar or in the Monday article before that, could be a more reasonable way of approaching the matter.
USD/JPY Four-Hour Chart
Chart prepared by James Stanley; data derived from Tradingview
--- written by James Stanley, Senior Market Analyst, Global Macro
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