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

US Dollar Talking Points:

• The US Dollar has put in three strong weeks of gains, finally finding resistance at a trendline projection late last week that has since restrained the advance.
• EUR/USD is showing a falling wedge formation, which could open the door to pullback potential while GBP/USD is finding resistance at a key spot on the chart. This webinar looked at a number of USD setups and related markets and this article will touch on some of the high points.
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The US Dollar has pulled back over the past few days after a strong bullish trend ran into a bearish trendline. That bullish move in the USD stands in stark contrast to the currency just a month earlier as a key spot of support had come into play to help hold the lows The pullback has thus far remained as somewhat shallow, with buyers holding the lows above a support level at 103.82.

I had looked into this matter in the weekend article, USD Turn Gathers Steam, and as I had shared in that article, there was an open door for a pullback theme as there were even tendencies of short-term overbought behavior in the DXY market. That, combined with a show of resistance after three really strong weeks seemingly opened the door for bulls to show some profit taking.

Perhaps that has happened, to a degree, but so far buyers have held support above prior resistance which keeps the door open for topside continuation themes. For support in DXY, I’m tracking 103.82 as a key level but it’s very nearby, so 103.62 and 103.45 offer a couple of additional nearby levels. The 103.00 level is also key as this was support last week as DXY built a morning star formation on the daily chart.

US Dollar - DXY Daily Price Chart (indicative only, not available on Forex.com platforms)

EUR/USD Falling Wedge

In a related matter, EUR/USD remains in a falling wedge formation. Sellers have remained aggressive near resistance but less so around fresh lows, which has helped the formation to come together.

But a bullish reversal from the formation doesn’t necessarily have to entail a full-scale trend change:  This could also be a pullback in the bearish move, highlighting longer-term levels of prior support that may come back as resistance.

The price of 1.0943 is of interest for such a scenario as this was a Fibonacci level that offered support multiple times but, notably, hasn’t shown much for resistance since the pair broke down a few weeks ago.

Also of note are resistance levels around 1.0787, 1.0846 and 1.0900. For next supports in EUR/USD, there’s a Fibonacci level at 1.0611 before a major zone comes into play around the 1.0500 psychological level.

EUR/USD Daily Price Chart

GBP/USD

GBP/USD has so far found resistance for this week at a key spot of prior resistance, taken from the same 1.2444 level that had capped the highs in December and then again in January. Two weeks ago, the pair ran into a bearish trendline, and sellers have been pushing lower-lows and lower-high since. But, notably, the GBP/USD pair has been more cautious with bearish themes than what was looked at above on EUR/USD.

Of interest for this week is the fact that GBP/USD appears to be trying to hold a higher-low above last Thursday’s swing-low. This can keep the door open for a deeper pullback, with follow-through resistance potential at the 1.2500 psychological level.

I’m tracking next support in the pair around the 1.2250 psychological level.

GBP/USD Daily Price Chart

Chart prepared by James Stanley, GBP/USD on Tradingview

USD/JPY

The USD/JPY pair put in a significant breakout over the past couple of weeks as a strong US Dollar and a weak Japanese Yen allowed for some strong vertical movement. Last Friday saw the USD/JPY pair breach through the 140.00 level as if it wasn’t even there, and bulls continued all the way to a fresh high at 140.92 that was set yesterday.

That daily bar from Monday showed as a spinning top and so far today’s is showing a strong bearish reaction, opening the door to a possible evening star formation.

At this point support on the daily bar is showing at a key area, taken from the 50% retracement derived from the Fibonacci retracement around the pullback move, which spanned from last October’s high down to this January’s low. That level is at 139.59 and if bulls can’t hold support at or above that price, the door could open for a deeper pullback on the basis of that evening star formation. This can point to deeper support, such as the 138.25 level that helped to set last week’s low or perhaps the prior spot of support-turned-resistance-turned-support again at 137.68.

USD/JPY Daily Price Chart

Chart prepared by James Stanley, USD/JPY on Tradingview

USD/CAD

USD/CAD has moved back to a familiar spot on the chart. The 1.3652 level has been key, as this was used for breakout setups in March, which led to a show of support at that price level following an ascending triangle breakout.

But, after a prolonged bout of support at that level, USD/CAD began to set up for the other direction and prices broke down very quickly, eventually running into a spot of confluent support while brewing a falling wedge along the way.

The support bounce from the 1.3338 Fibonacci level has continued with price re-engaging with that Fibonacci level at 1.3652 last week. The pullback from that price has so far held support at a prior swing high, which can keep the door open for short-term bullish themes but there’s also another spot of possible support a little deeper, around the 1.3500 psychological level. This was resistance ahead of last week’s breakout and as yet, there hasn’t been much for support at this price on the chart.

USD/CAD Daily Price Chart

Gold

Gold prices have put in a strong bounce from a trendline to start this week. That trendline came into play on Thursday and it was tested through last week’s close; but this week saw prices gap-higher and hold on to the 1950 level as support before returning for a test of resistance at 1981.

The $2,000/oz level is notable here and tomorrow is the final day of May trade, and Gold futures have never shown a monthly close above that level. This keeps the door open for an interesting final day of May trade in the Yellow metal.

Gold Four Hour Price Chart (Indicative Only)

--- written by James Stanley, Senior Strategist

To follow James on Twitter, he’s @JStanleyFX