US Dollar, EUR/USD, GBP/USD, USD/CAD, AUD/USD Talking Points:
- The US Dollar is holding a spot of support after pulling back from a fresh 2021 high set last Friday.
- Tomorrow morning will be busy in the USD: PCE data, the Fed’s preferred inflation gauge, is released at 8:30 AM ET, and FOMC Chair Jerome Powell speaks from Jackson Hole, Wyoming at 10:00 AM ET in a speech titled, ‘The Economic Outlook.’
- 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.
The US Dollar has been bouncing through the US session so far today, but it’s tomorrow that has most traders’ attention as we’ll see the most recent PCE read before Jerome Powell’s speech at Jackson Hole. That one-two combo can serve to keep the USD on the move but, expectations have diminished over the past couple of weeks for what Powell may actually say here.
At the July FOMC rate decision, Powell sounded as dovish as ever, shrugging off 5% inflation reads and, instead, highlighting how the labor market remains far away from the ‘significant further progress’ that the bank wants to see before making policy less loose.
But a couple of days later, FOMC Vice Chair Richard Clarida sounded a bit more hawkish, saying that he could foresee an earlier start to tapering asset purchases and this was echoed in the FOMC meeting minutes that were released that were released last week, with most participants seeing a 2021 start to the tapering process.
This helped USD to firm up to a fresh 2021 high before prices started to turn-around last Friday, and that pullback continued through the early portion of this week, with USD now resting at a key spot of support around the 92.80-92.90 zone on DXY.
US Dollar Two-Hour Price Chart
EUR/USD Breakdown Falls Flat
As the USD was surging last week, EUR/USD was finally able to break through a big spot of support around the 1.1700 handle. The problem is what happened after, as prices moved down to 1.1665 and then stalled, even as the USD continued to track-higher. A day later, on Friday, sellers were stymied again and prices soon broke back-above support. The 1.1750 offered another element of resistance and while that held the highs on Tuesday, it was eventually traded through on Wednesday and, at this point, we’re seeing a bit of support show around that prior area of resistance.
This can keep the door open for a move up towards the prior batch of resistance, taken from around the 1.1800 handle that held the highs two weeks ago.
EUR/USD Four-Hour Price Chart
GBP/USD may hold some allure for those that are bearish on the USD going into Jackson Hole. What’s interesting in GBP/USD is the fact that as EUR/USD and many other majors were pushing to fresh highs/lows on the back of last week’s USD strength – GBP/USD was not. As a matter of fact, the July swing-low remains unfettered, with support last week showing around the 1.3600 handle. Since then, as USD weakness has persisted, GBP/USD has popped back for a test of the 1.3750 area, building some higher-low support along the way.
This can keep the door open for bullish strategies in the pair.
GBP/USD Four-Hour Price Chart
USD/CAD Holding Support at a Key Spot
I looked into this one on Tuesday and much of the case remains the same. At the time a key spot of support was coming into play at a confluent spot on the chart. That support has since held and prices have put in a minor bump-higher. This keeps the door open for bullish scenarios in the pair, particularly for those with a bullish bias on the USD going into Jackson Hole.
USD/CAD Four-Hour Price Chart
AUD/USD Plunge Snaps Back
Sticking with commodity currency pairs, AUD/USD similarly remains attractive for scenarios of USD-strength. Like USD/CAD, that US Dollar strength was on full display last week as the Dollar was surging. And similarly, as the USD pulled back this week, so did the general trend in AUD/USD and USD/CAD.
In AUD/USD, prices are pushing back to a zone of potential resistance as taken from prior support. A hold there keeps the door open for bearish trend strategies in the pair, looking for an eventual move down towards the .7000 psychological level that hasn’t yet come into the equation in 2021 trade.
AUD/USD Daily Price Chart
— Written by James Stanley, Senior Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX