US Dollar Softens From Fibonacci Resistance as EUR/USD Holds the Lows

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US Dollar Talking Points:

– Yesterday brought a bullish breakout in the US Dollar as DXY traded above a key level that had previously brought four different resistance tests earlier in October. Prices shot through this resistance yesterday and soon found sellers at another level of interest around 96.47, which is the 23.6% Fibonacci retracement of the 2011-2017 major move.

– This morning’s ECB rate decision brought little by way of Euro volatility upon the release of the statement. The European Central Bank made only minor alterations to the prior policy statement, and the bank appears set to continue winding down bond purchases while targeting interest rate hikes no earlier than ‘summer of 2019.’

– DailyFX Forecasts on a variety of currencies such as the US Dollar or the Euro are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.

ECB Makes Minimal Changes to the Statement

This morning brought an ECB rate decision, and this was the first meeting since the bank began tapering stimulus purchases earlier this month. In the statement, the bank said that they were still on pace to finish stimulus by December of this year while also looking at rates staying at current levels ‘at least through summer of 2019.’ So there was very little by way of new information for traders to work with.

As a result, the Euro didn’t really show much for volatility around the statement release, and that follows yesterday’s short-side breakout in EUR/USD. Buyers have been trying to cauterize support since yesterday’s US open, and as US markets move towards the Thursday open, that push higher on the chart is continuing to move up towards prior areas of support.

EUR/USD Two-Hour Price Chart

US Dollar Softens From Fibonacci Resistance as EUR/USD Holds the Lows

Chart prepared by James Stanley

This sets up the potential for a fairly interesting showdown. Coming into this week, EUR/USD had fallen into a stubborn area of support that just did not want to give. This week finally saw bears push through and continue to run into yesterday’s US open, but with support holding – the big question is whether sellers can use that area of prior support to stage a campaign of continuation in the pair.

EUR/USD Eight-Hour Price Chart

US Dollar Softens From Fibonacci Resistance as EUR/USD Holds the Lows

Chart prepared by James Stanley

EUR/JPY For Trend Strategies

For traders looking to trade momentum in the Euro, EUR/JPY may be of interest. The pair is bouncing off of the 127.50 psychological level, and prices are moving up towards a Fibonacci level that’s previously offered a few different iterations of support already this year at 128.52. Traders looking for bearish continuation strategies in the pair can look to a couple of different resistance levels beyond this, around prior support of 129.10 or, a bit deeper around 129.66.

For those that would like to play reversals in the pair, overcoming that 128.52 marker could be a key first step to bullish reversals.

EUR/JPY Two-Hour Price Chart: Bounce From Key Psychological Level 127.50

US Dollar Softens From Fibonacci Resistance as EUR/USD Holds the Lows

Chart prepared by James Stanley

US Dollar Holds Fibonacci Resistance After Yesterday’s Bullish Breakout

The US Dollar was finally able to overcome resistance at the 96.04 level after four separate tests earlier in October. The fifth time was the charm, apparently, as prices broke out yesterday to run-up to another big area on the chart at 96.47. This was a focus chart during Tuesday’s webinar, as each of those resistance hits at 96.04 appeared to carry less impact from sellers, leading to a bullish trend-line connecting the lows and making up an ascending triangle formation that fed into yesterday’s breakout.

USD Two-Hour Price Chart

US Dollar Softens From Fibonacci Resistance as EUR/USD Holds the Lows

Chart prepared by James Stanley

The big question is how motivated bulls might be after yesterday’s breakout. There were two separate tests at 96.47 yesterday, each of which faltered, and prices started to show a shallow pullback that’s lasted into the Euro open. This can set up USD price action in a couple of different ways for the trader, depending on how they would like to approach the matter. For those that would like to approach a bit more conservatively, they could wait to see if support shows at that prior area of resistance around 96.04. For those that would like to move forward a bit more aggressively, bullish breakouts could be sought on tests above that 96.47 level.

US Dollar Four-Hour Price Chart

US Dollar Softens From Fibonacci Resistance as EUR/USD Holds the Lows

Chart prepared by James Stanley

GBP/USD Finds Fibonacci Support After Bearish Breakout

It’s been a rough week for the British Pound, and this comes after an item of positivity showed yesterday as PM Theresa May survived the 1922 Committee. It appears as though she’s not yet completely out of the woods, and this additional risk has continued to bring an impact to GBP price action as the currency has continued to sell-off. I looked into bearish breakouts in GBP/JPY as part of this week’s FX Setups of the Week, and on Monday I had looked at bearish plays in GBP/USD on the basis of resistance showing at prior support following a symmetrical wedge break.

At this point, both pairs are at fresh seven-week lows, and GBP/USD has started to dig-in to support at a key area, as 1.2877 is the 61.8% retracement of the 2017-2018 bullish move in the pair.

GBP/USD Four-Hour Price Chart

US Dollar Softens From Fibonacci Resistance as EUR/USD Holds the Lows

Chart prepared by James Stanley

Similar to the US Dollar above, this move brings about two different ways of approaching matters of continuation: Traders can look for breakouts in the direction of the move, waiting to enter upon the print of fresh lows below this level of support. Or, alternatively, traders can wait to see if a pullback develops to an area of prior support in the search for fresh resistance, at which point short-side setups could be triggered with the aim of down-trend continuation.

GBP/USD Two-Hour Price Chart

US Dollar Softens From Fibonacci Resistance as EUR/USD Holds the Lows

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 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.

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