US Dollar, EUR/USD, USD/CAD Talking Points:
– The US Dollar set a fresh yearly high yesterday, breaking above an ascending triangle pattern that’s been brewing since Q4 of last year. Momentum began to wane above that resistance level, however, and this has led to almost 24 hours of posturing from bulls. But, on a shorter-term basis, pullbacks from resistance have grown shallower, leading into another possible bullish breakout setup.
– Yesterday’s US Dollar strength was noticeable against many major pairs, but EUR/USD has thus far respected the five-month-old support structure. If USD cannot continue to push-higher, EUR/USD may be setting up for a nasty bear trap. Commodity currencies have been especially vulnerable to this recent raft of USD-strength, and USD/CAD is sitting very near three-month-highs with a Bank of Canada rate decision set to take place later this morning.
– DailyFX Forecasts are published on a variety of currencies such as the US Dollar or the Euroand 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 Gold prices? Check out our IG Client Sentiment Indicator.
US Dollar Sets Fresh Yearly High – and Then Stalls
After five months of resistance at the 97.70 level, the US Dollar has finally perched up to a fresh annual high. This took place yesterday morning, just after Gold prices began to dive-lower, testing below the 1270 level on the chart. This flare of USD-strength was especially noticeable against commodity currencies, and the Canadian Dollar will remain on center-stage today for the April Bank of Canada rate decision.
In the US Dollar, prices soon pulled back after testing above the 97.71 level, and this was followed by another test of that resistance. That was followed by another, albeit shallower pullback, at which point buyers stepped-in again to bring prices back to 97.70. At this point from short-term charts, it appears as though an ascending triangle is building with higher-lows coupled with horizontal resistance. This is a formation that will often be approached in a bullish manner, looking for the motivation that’s driven-in bulls at higher-lows to, eventually, allow for a topside breakout through horizontal resistance. This could be utilized by short-term traders, looking at the hourly chart below.
US Dollar Hourly Price Chart
The short-term ascending triangle above may have traders cautious, and if considering the previous three instances of prices reversing around this level, that makes sense. Taking a step back to the daily chart, and the lack of momentum around resistance can be taken as a failure to break through; which can open the door for reversal scenarios for traders with longer-term, swing-trading points-of-view; or for thsoe not expecting a continuation of USD-strength.
US Dollar Daily Price Chart
EUR/USD Bear Trap Potential
I had looked at this in yesterday’s webinar, as EUR/USD continues to carry the potential of a bear trap scenario. Coming into the week, a re-test of support seemed probable, and that took place fairly quickly as the Dollar leapt up to resistance yesterday. This sank EUR/USD down to the big support zone that’s been in-play since November, at which point prices began to stall below the 1.1200 handle. And similar to USD above, the market began to bob back-and-forth around support, with prices holding the lows in this key zone on the chart.
For traders looking at a pullback scenario in USD, the topside of EUR/USD could be compelling. At the very least, the risk management of the situation could be clear, as the recent low around 1.1175 could be used to strategize stop placement, or even look to reverse the stance into a bearish position for down-side breakouts.
EUR/USD Price Four-Hour Chart
USD/CAD Near Three-Month Highs Ahead of BoC
One area that has clearly shown this recent rally in the US Dollar are commodity currency pairs, and a little later this morning, a Bank of Canada rate decision will take place that’ll keep USD/CAD in the spotlight.
At this point, the pair has pushed through a number of Fibonacci levels that helped to make up a big batch of resistance. A long-term level is currently helping to set the high, as this comes from the 61.8% Fibonacci retracement of the 2002-2007 major move in the pair, residing at 1.3462. Just above that is the 1.3500 psychological level, after which the yearly high is at 1.3662.
USD/CAD Weekly 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 Q2 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 an abundance 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