US Dollar, EUR/USD, AUD/USD Talking Points:
- Today marks the Q3 close and the next two days bring a busy economic calendar.
- USD strength has shown in September but that’s been a change-of-pace to the bigger-picture trend of weakness. Which will take over in Q4?
- 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.
So we’re in the final hours of Q3 and the rest of this week brings some high-impact data out of the United States. This could serve to extend the near-term bullish trend in USD or, perhaps, may help to bring bears back into the mix to re-test those two-year-lows that came into play earlier this month.
Tomorrow could be especially pensive as we get both PCE and PMI numbers out of the US. The PCE number will give some insight into inflationary pressure; and the day after brings Non-Farm Payrolls so market participants will get an updated view on the employment picture out of the United States. Collectively, these data outlays can help to re-frame the September outlay that saw a noticeable change-of-pace in both stocks and currencies.
US Dollar: Will September Close as Bullish Engulfing?
Coming into September the US Dollar was beset by a sell-off that had held since the March spike. Prices in USD pushed down to fresh two-year-lows on the first day of the month, running into a giant area of confluent support. That’s where matters begin to shift, and after a support hold in the first couple of weeks of September, buyers got a bit more active last week in helping the currency to push up to a fresh high.
At this point, the monthly chart shows a not-yet-confirmed bullish engulfing pattern. Such formations will often be approached with the aim of bullish continuation, and when taken with the context of long-term support, this can keep the door open for bullish continuation themes into the Q4 open. For this formation to confirm, today’s price action would need to close above the August open at 93.44.
US Dollar Monthly Price Chart
Taking a shorter-term look at the matter: The US Dollar shows signs of bullish trend potential, focusing on the recent series of higher-highs and higher-lows. The bigger question comes from where that higher-low support may present itself. The price around 93.60 appears of interest, as this is the 38.2% retracement of the recent bullish move – and that level is confluent with a prior swing-high. A bit deeper, around 92.70 up to 92.89 is another area of potential – but the question must be asked if this zone comes into play – have bulls begun to waive the white flag as bears show a greater pull.
US Dollar Eight-Hour Price Chart
Chart prepared by James Stanley; USD, DXY on Tradingview
EUR/USD Tests Lower-High Resistance
Of USD-pairs, EUR/USD continues to carry some allure as an attractive option for USD-strength. I had previously talked about resistance potential at the 1.2000 handle in the pair. That price came into play to start September, after which sellers started to take-over, highlighted by a breach of rising wedge support. And after last week’s very clear push of USD-strength, EUR/USD made a push all the way down towards the 1.1600 area before pulling back.
EUR/USD Daily Price Chart
Coming into this week I had looked at the short-side of the pair, plotting for resistance potential around that price of prior support, taken from around the 1.1750 psychological level. That resistance came into play last night, and prices pushed down by more than 70 pips. But sellers were unable to maintain the move and that level is now back in-play.
This can be a compelling option for those who want to look for USD-strength through tomorrow’s data outlay.
EUR/USD Four-Hour Price Chart
AUD/USD Bounce from Big Fig Continues
AUD/USD has been on quite the ride of recent – putting in an aggressive sell-off last week on the back of USD-strength. But – support showed up at the .7000 psychological level and that’s helped to reverse a portion of that move. Buyers have come back with gusto this week and prices are now pushing up for a resistance test around prior support, taken from the .7185 Fibonacci level up to around the .7200-handle.
There may be a bit of early resistance showing at this point from a prior trendline projection, shown in the chart below. A hold here can be of interest to sellers but, likely, that big zone of prior support being repurposed as resistance would be even more attractive.
AUD/USD Daily Price Chart
— Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX