US Dollar, EUR/USD, GBP/USD, AUD/USD Talking Points:
The US dollar put in a quick move of strength this morning on the back of a really strong retail sales report. This helped the USD to push above a big zone of resistance while setting a fresh September high, and at this point, from a short-term basis, we can see buyers trying to hold the move by showing support around the topside of that prior resistance zone, plotted around 92.89, the same level that I had looked at on Monday as resistance in DXY.
US Dollar Hourly Price Chart
Can Bulls Retain the Range Break with the Fed Around the Corner?
The big question here is whether buyers can sustain the move. The range in USD had held fairly well through September trade, and with a really big FOMC meeting on the economic calendar for next week, that made sense.
But, with this morning’s really strong retail sales report pushing the Greenback above range resistance, there could be scope for further strength as investors and traders position ahead of that rate decision next Wednesday.
Taking a step back highlights the early nature of this theme, with the USD just starting to test above that resistance; but still showing a move that may be faded by traders looking to play compression ahead of the FOMC.
US Dollar Four-Hour Price Chart
EUR/USD Sets Fresh September Low
When I looked at the US Dollar and related pairs on Monday, EUR/USD was holding on to a bullish move. As I had shared, the resistance zone around the 1.1850 level could be used for bearish continuation strategies and after a test in that zone on Tuesday, bears have been on the attack.
This morning brought a decisive move below the prior swing-low of 1.1768, and on the hourly chart there’s even been a build of short-term resistance at that level, highlighting its relationship to the 92.89 level on DXY.
The complication with bearish continuation here is the big zone of support lurking just below, spanning from 1.1709-1.1736. That area was in-play in both March and August of this year, with the current 2021 low just a little lower at 1.1664.
Similar to the USD above, the big question is whether EUR/USD bears are confident enough to pose a break ahead of the FOMC rate decision next week.
EUR/USD Four-Hour Price Chart
GBP/USD Back to Support
I was looking at GBP/USD for short-side setups in the USD on Monday, with eyes on the 1.3879 Fibonacci level for breakout potential. That level was tested through on Tuesday but price action turned around very quickly and dove down to the support zone that was in-play last week. This spans from the 1.3750 psychological level up to 1.3768, and this can retain a possible option for those looking to trade this recent move of strength in the USD.
GBP/USD Four-Hour Price Chart
AUD/USD Falling Wedge with a Support Test
Another market testing some support after this USD rip up to resistance is AUD/USD. The pair had put in a strong reversal from the August lows, jumping by more than 375 pips up to the September high.
So far in September, however, that move has been pulling back and there’s been about 50% of it retraced already. That 50% retracement is confluent with another Fibonacci level, taken from the 23.6% retracement of the May-August major move.
There’s another item here that can keep the door open on the long side, provided that this support can hold through the day, and that’s a falling wedge formation that’s built through September trade. Falling wedges are often approached with the aim of bullish reversals and, again, if that support can hold, then the door may remain open to that theme and similar to the above in GBP/USD, it can be an option for those looking to fade this recent move of strength in the US Dollar.
AUD/USD Four-Hour Price Chart
— Written by James Stanley, Senior Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
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