Gold Price, EURUSD, US Dollar Talking Points:
– Yesterday’s FOMC rate decision brought a quick-move of USD-weakness that saw the currency push down to test a key trend-line on the chart. That support has since held, but the ramifications of that move continue to be felt in related markets such as EURUSD and Gold prices. Both markets put in stern topside breakouts, running to the next area of potential resistance. The big question now is whether that strength can continue in EURUSD and Gold prices; or whether US Dollar bulls exhibit a strong reaction to yesterday’s trend-line test.
– Of particular note around yesterday’s FOMC rate decision was the movement in equities. Stocks were very strong in the immediate aftermath of the statement release; but those gains slowly dissipated and, at this point, the net result has been a bearish move lower. This may be coming from a bit of fresh fear as the Fed went more dovish than many had anticipated; begging the question as to whether this might trigger a fresh round of risk aversion after the development of the bullish backdrop in 2019 trade.
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It’s been a fast and furious day of price action across global markets with yesterday’s FOMC rate decision pushing economic themes around-the-world. The FOMC came out very dovish, forecasting zero rate hikes through the remainder of this year and just one for next year. The immediate reaction was a quick move of strength in US stocks that has since dissipated, going along with a bearish push in the US Dollar until prices ran into trend-line support.
Today’s price action should remain very interesting as a number of these themes remain unsettled. One of the big takeaways in the aftermath of FOMC has been a clean topside breakout in Gold prices. I had looked at a key zone of resistance in Gold prices a couple of different times this week, looking for bullish breakout potential to run-up to the confluent area around $1320. That move has already played out, and Gold prices are now pulling back after testing that key area on the chart. The big question now is how motivated bulls might remain to be: Will they allow for prices to push back to find support around prior resistance? Or, are buyers going to remain excited enough to push from higher-low support around the 1314-1315 area?
Gold Price Two-Hour Price Chart
US Dollar Moves Down for a Trend-Line Re-Test
Yesterday’s FOMC rate decision surprised many by just how dovish the bank appears to be, and this brought in a quick run of USD-weakness that saw the currency push down to a key area of trend-line support. That trend-line has since helped to hold the lows, and this keeps the longer-term ascending triangle formation in-order unless a deeper downside break presents itself.
US Dollar Daily Price Chart
EURUSD Rallies All the Way Up to Prior Range Resistance
Going along with that move of extreme short-term weakness in USD running into support, EURUSD experienced a pronounced bullish run that saw prices move all-the-way up to prior range resistance around 1.1448. This level came into play just after the rate decision, and since then prices in the pair have been peeling lower, now re-testing the 1.1400 area.
EURUSD Daily Price Chart
The big question here, and this will likely remain inextricably linked to the above question in the US Dollar; is whether a large run of strength might be in the cards after yesterday’s pronounced move. It was just two weeks ago that the ECB announced another fresh round of TLTRO’s while aggressively cutting growth forecasts. This dovish move served to provide about a day’s worth of weakness to the single currency, at which point prices caught Fibonacci support around 1.1187 before starting a rally that has continued through FOMC.
EURUSD Two-Hour Price Chart
For traders that do want to look for a deeper breakdown in the US Dollar after yesterday’s dovish shift at the Fed, there are a number of potentially attractive markets to work with.
I had looked at three setups designed for weakness (and one for USD-strength) in this week’s FX Setups; and while USDJPY no longer looks as attractive for continued topside, the three areas for USD-weakness remain of interest. In AUDUSD, prices have climbed back-above the key area on the chart that runs from .7125-.7150, and the ‘big’ area of longer-term resistance lurks above. This area runs from .7185-.7206, and this zone did a great job of holding the highs in the pair in the second-half of February. This area can function as topside profit targets for short-term strategies around USD-weakness.
AUDUSD Four-Hour Price Chart
USDCAD Remains in Range: Bounce From Support Moves Towards Resistance
USDCAD has remained in a range over the past week; and prices put in a quick resistance test earlier this week, followed by a push down to support around the 1.3236-1.3259 area. That level has since helped to hold the lows and prices are now pushing back-towards prior resistance. A hold of resistance in the zone that runs from 1.3361-1.3385 can keep the door open for short-side strategies in the pair.
USDCAD Four-Hour 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 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 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