USD Price Action Setups: EUR/USD, GBP/USD, USD/JPY, USD/CAD

US Dollar Talking Points:

• The US Dollar is threating to break its streak of four consecutive weeks of gains on the weekly chart, with a couple of key items on next week’s economic calendar including the release of Non-farm Payrolls on Friday morning.

• I’ll be addressing each of these markets in next week’s price action webinar, set for Tuesday at 1PM ET. If you’d like to sign up, this link will allow for registration.

There are a few hours to go but, as of this writing it looks like the USD may soon break its streak of four consecutive weeks of gains as taken from the weekly chart. All hope is not lost for bulls, however, as DXY price action held support at a key spot of support at 104.14, which is the 23.6% Fibonacci retracement of the September-February sell-off. That level came into play on Wednesday and helped to set the low for the week, with prices pushing back up to the 105.00 resistance zone on Thursday which helped to hold bulls at bay again, for a third time this week.

Next week’s economic calendar brings a couple of key drivers to the table, with a speech from FOMC Chair Jerome Powell on Tuesday and the Non-farm Payrolls release on Friday.

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

Taking a step back to the weekly chart of the US Dollar via DXY, the longer-term zone that runs from 103 up to 103.82 remains important. If bulls are unable to defend that next week, the prospect of bullish trends in the USD will dim and this can quickly put bears back in-control of price action in the Greenback ahead of the FOMC rate decision scheduled for March 21-22. This would likely need some support from Chair Powell earlier in the week and the NFP report later in the weekly would likely need to show some element of softening from last month’s massive showing.

On the topside of DXY price action, the 105-105.10 zone remains relevant as that’s held a few different inflections already. Beyond that, 105.63 has some longer-term implications, and if bulls can push through that, follow-through resistance appears at 106.15 (Fibonacci level related to the 23.6 that held support this week) after which 107.80 comes into play. That theme would likely require some degree of hawkishness from Chair Powell and/or another strong NFP print.

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

The relevance of those drivers is how it may impact rate hike odds for the March meeting at the Fed which, as of this writing, is holding a 30.6% probability of a 50-basis point hike, up from zero percent a month ago and 27% last week.

Rate Hike Probabilities per CME FedWatch

EUR/USD

With the Euro making up 57.6% of the DXY quote many of the dynamics looked at above are going to remain vulnerable to movements in the EUR/USD pair, which came into the week showing weakness before finding support just above the 1.0500 handle ahead of the US open on Monday. After that, price put in a corrective move that took on the appearance of a short-term bear flag formation.

The 1.0500 spot in EUR/USD remains an important juncture on the chart. This is where bears were stifled earlier in the year which led to the extension of the bullish move before price built into the rising wedge formation, which topped out at the 76.4% Fibonacci retracement of the Feb-Sept. bullish move at 1.1033 last month. Bears made a loud re-entry after that inflection and drove for the rest of February, but the 1.0500 level remains a roadblock, and this will need to be taken-out for bears to continue the move, after which the 1.0350 area comes back into the picture.

On the resistance side of the coin, the Fibonacci level at 1.0747 remains key as this is the 61.8% retracement from the same study that helped to carve the high. If bulls push above 1.0800, the bearish theme in the pair won’t look as attractive.

EUR/USD Daily Price Chart

GBP/USD: Cable Congestion

GBP/USD put in a false breakout from the falling wedge formation, finding resistance just below the prior week high at 1.2148. The 1.2000 psychological level continues to show impact as sellers haven’t been able to make much ground below the big figure yet.

On a longer-term basis, the double top formation remains which is often approached with a bearish aim, looking for a break of the neckline to open the door to bearish breakout potential. The falling wedge, meanwhile, is usually approached with the aim of bullish breakouts, so the potential remains for a short-term move of strength as the wedge resolves, at which point resistance comes into the picture below the double top of 1.2447. Prices at 1.2263 and 1.2297 remain of interest for lower-high resistance, as the former level was a spot of support-turned-resistance while the latter is a Fibonacci level that’s exhibited both support and resistance.

GBP/USD Daily Price Chart

USD/JPY

USD/JPY came into the week with considerable strength and Yen-weakness remained a big part of that to go along with the USD strength that’s displayed over the past four weeks. This week saw price find resistance at the 38.2% Fibonacci retracement of the October-January sell-off which is plotted at 136.67. Support potential remains at prior resistance of 134.45-135.00, after which the 133.09 level comes into the picture, which is confluent as both the 38.2% retracement of the 2021-2022 major move and the 23.6% retracement of the October-January sell-off.

On the resistance side of the coin, 138.06 looms large as a spot of prior support-turned-resistance, followed by a resistance zone just inside of the 140.00 handle.

USD/JPY Daily Price Chart

USD/CAD

I’m going to include USD/CAD this week as the pair may be of interest to USD bears as the pair tests a key level of Fibonacci resistance.

Last week’s price action in USD/CAD has taken on the form of a doji, highlighting indecision, and this showed up at a key spot on the chart, as taken from the 61.8% Fibonacci retracement of the 2020-2021 major move. This would be the second consecutive week that this level helped to hold the high, which could keep the door open for swings should that level hold through early trade next week.

USD/CAD Weekly Chart

--- written by James Stanley, Senior Strategist

Follow James on Twitter @JStanleyFX