US Dollar Price Action Setups: EUR/USD, GBP/USD, AUD/USD, USD/CAD

US Dollar Price Action Setups: EUR/USD, GBP/USD, AUD/USD, USD/CAD

US Dollar Talking Points:

  • This morning brought the release of PCE data for the month of January. This is the Fed’s preferred inflation gauge and the last such reading that the bank will see ahead of the March rate decision.
  • Core PCE printed at 5.2% v/s the 5.1% expected, while Durable Goods came in at 1.6% v/s .8%. The initial response has been weakness in USD so far.
  • Ahead of the print it was a very busy week for the USD with impact from the Russian invasion of Ukraine showing in a number of markets, the USD included.
  • Below I look at the backdrop in four major currency pairs ahead of next week, in which we have high-impact US data on the calendar for each day Tuesday-Friday.
  • The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.

It’s been a chaotic week across global markets and, well, the globe, and this morning brought another potential driver into the mix with the release of January PCE data out of the US.

Inflation has been the ongoing saga in the US economy and we’re at the point where the Fed is ready to move, but the big question is by how much. And we pretty much know the when as the FOMC rate decision on March 16th is when the world has been preparing for that announcement of higher rates.

But this week’s geopolitical items have brought that into question, to some degree, as hiking aggressively into a potential global conflict could be a recipe for disaster. Just last week, it seemed like a 50 basis point rate hike in March was probabilistic. This week, it looks downright unlikely, helped along by some dovish Fed-speak along the way.

This has also carried impact into the USD with a massive move that was partially reversed yesterday. And this outsized jump yesterday all emanated from a symmetrical triangle formation that had been loading up and coiling for a couple of weeks prior.

US Dollar Two-Hour Price Chart: Triangle Resolved

Chart prepared by James Stanley; USD, DXY on Tradingview

That USD breakout found resistance at a key spot on the chart, taken from the 61.8% Fibonacci retracement of the 2020-2021 major move; and it’s been a one-way show since that level came into play yesterday afternoon.

US Dollar Daily Price Chart

USD daily price chart

Chart prepared by James Stanley; USD, DXY on Tradingview

EUR/USD False Break

Going along with that USD reversal was a rather dramatic turn of events in EUR/USD. The pair breached support and trickled a few pips below the prior swing to set a fresh 18-month low in the pair.

But after that prices started to jump and ran right back into a key zone from 1.1187-1.1212, which held for a bit, but buyers have only continued to press and this morning’s PCE data may give them even a bit more fuel. There’s another resistance level at 1.1250, and another at prior support of 1.1300.

One of the takeaways from this week, along with softer USD rate expectations, has been similar diminishing of rate hike hopes for the Euro-zone, which could lead to further Euro-weakness at some point, keeping the focus on these near-term resistance levels.

EUR/USD Hourly Price Chart

eurusd price chart

Chart prepared by James Stanley; EURUSD on Tradingview

GBP/USD

Cable was my favored long-USD scenario coming into this week, largely on the basis of deduction from the prior few weeks. But the USD-strength theme showed up here aggressively as the pair fell by more than 300 pips from the Wednesday high to the Thursday low.

This did, however, amount to a temporary breach below a long-term bullish trendline that’s been in-play since the start of the pandemic, connecting 2020 and 2021 swing lows.

Bulls have pulled price back above that level for now, but the breach this week may be highlighting a sign of what’s to come in the GBP/USD pair.

GBP/USD Weekly Price Chart

gbpusd price chart

Chart prepared by James Stanley; GBPUSD on Tradingview

AUD/USD

On the short side of the USD, I remain bullish AUD/USD. Yesterday’s drop was similarly precipitous but at this point, AUD/USD has recovered the bulk of yesterday’s losses while EUR/USD and GBP/USD are well-below yesterday’s high.

The attraction here is the longer-term setup following last month’s test of the .7000 psychological level. The falling wedge remains in-play and there’s still potential for bullish scenarios, even with this week’s gyration.

AUD/USD Weekly Price Chart

audusd weekly price chart

Chart prepared by James Stanley; AUDUSD on Tradingview

USD/CAD Range Break Now What

USD/CAD has been in the midst of a remarkably consistent range throughout February trade, but yesterday’s explosion of USD-strength has brought that into question.

There’s potential for a couple of different things here… At this point, prices are finding short-term support around prior resistance. A hold here keeps the door open for bullish continuation scenarios.

But, if sellers can pose a breach of the 1.2750 psychological level, there’s potential for a deeper fade of that break yesterday and that could put focus back on range support, around 1.2672.

USD/CAD Four-Hour Price Chart

USDCAD four hour price chart

Chart prepared by James Stanley; USDCAD on Tradingview

— Written by James Stanley, Senior Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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Originally Posted on: https://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/daily_fundamentals/2022/02/25/US-Dollar-USD-Price-Action-Setups-EUR-USD-EURUSD-GBP-USD-GBPUSD-AUD-USD-AUDUSD-USD-CAD.html
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