US DOLLAR KICKS OFF THE WEEK BY RUNNING BACK TO SUPPORT

Last week saw near-term Dollar weakness continue after the disappointing NFP report from the Friday before. DXY made a late-week attempt to re-test the 90.00 level, but even that fell flat as sellers came in ahead of that potential resistance. As we open up a fresh week, the Greenback has run right back to the support zone from last week, and this is the same area that held the lows in DXY for the bulk of March.

US DOLLAR VIA ‘DXY’ FOUR-HOUR CHART: LAST WEEK’S STRENGTH RUNS SHORT OF 90.00, BACK TO SUPPORT

(Click on image to enlarge)

Chart prepared by James Stanley

US DOLLAR RANGE APPEARS SET TO CONTINUE

The US Dollar has now been range-bound for two-and-a-half months. Prices ran-lower through the first few weeks of 2018, hitting a key area of Fibonacci support, and after another test of that level in February, price action has continued to oscillate back-and-forth with range-like behavior. This move is related to the range that we’ve seen in EUR/USD, and given that DXY is comprised of a 57.6% allocation to the single currency, this relationship makes sense. As long as we see the range in the US Dollar continue, we’ll likely be seeing some element of range-bound price action showing in EUR/USD.

If support does not hold in the current zone, there are two areas below current price action that would allow for range-continuation. The next level-lower would be the swing-low from late-March, and below that we’d have the 61.8% Fibonacci retracement of the 2014-2017 major move, as this level helped to quell the USD down-trend after the January sell-off and remains as long-term support in DXY.

US DOLLAR FOUR-HOUR CHART: DEEPER SUPPORT POTENTIAL WHILE RANGE REMAINS

(Click on image to enlarge)

Chart prepared by James Stanley

EUR/USD MOVES UP TO RESISTANCE

Much like the US Dollar, the multi-month range remains alive and well in EUR/USD. As we open a fresh week, prices are near the resistance side of this range, making for a challenging position for bulls as we’re catching a bit of resistance below last week’s highs.

EUR/USD FOUR-HOUR CHART: MULTI-MONTH RANGE CONTINUES

(Click on image to enlarge)

Chart prepared by James Stanley

Last week saw a bullish short-term move in EUR/USD top-out when testing resistance at 1.2375, and this lead to another support test at 1.2300 before buyers came in to perk prices up ahead of the week’s close. As we open into a fresh week, EUR/USD is finding sellers just a bit-below last week’s resistance, and this puts price in a rather unattractive spot. A bit-higher on the chart is another zone of interest for range resistance, and this runs from 1.2412-1.2446.

EUR/USD HOURLY CHART: TESTING SHORT-TERM RESISTANCE

(Click on image to enlarge)

Chart prepared by James Stanley

GBP/USD HURDLES TOWARDS 2018 HIGHS

One pair that is not range-bound at the moment is GBP/USD, as prices are making a fast approach towards 2018 highs. This continues a streak that’s seen six consecutive days of gains in the pair, and this comes after GBP/USD wrestled around support at the 1.4000 level around Non-Farm Payrolls.

GBP/USD DAILY CHART: PRICES JUMP TO JANUARY RESISTANCE – CAN BUYERS HOLD THE MOVE?

(Click on image to enlarge)

Chart prepared by James Stanley

This week brings UK inflation numbers on Wednesday, and this is the last piece of inflation data that we’ll get before the Bank of England hosts their May ‘Super Thursday’ rate decision. There’s a strong probability of getting a hike at that meeting, so this inflation print would likely need to be very nasty to hit those odds of a rate rise. The bigger question around the pair is one of positioning, as we’ve just run into an area of resistance that had previously elicited a strong reversal; and this test of resistance is happening while near-term price action is overbought.

GBP/USD TWO-HOUR CHART: OVERBOUGHT RSI STARTING TO DIVERGE AS PRICES TEST RESISTANCE

(Click on image to enlarge)

Chart prepared by James Stanley

CAN USD/JPY PROD A MOVE OF BULLISH CONTINUATION?

Also of interest this week is the potential for continuation of Yen-weakness. Yen-strength became a prominent theme in February and remained as such throughout March. But as we’ve opened into April, weakness has started to show in the currency again, and this has opened the door to the prospect of continuation. In the major pair of USD/JPY, we’ve seen tendencies of bullish continuation showing throughout the month without bulls actually coming-in to prod significantly higher-highs or lows. We did see a new monthly high last week, but buyers lost motivation before testing the February high, and prices remain in a cautiously bullish state as we open into this week.

USD/JPY FOUR-HOUR CHART: BULLISH POTENTIAL REMAINS

(Click on image to enlarge)

Chart prepared by James Stanley

EUR/JPY

For the above theme of Yen-weakness, the US Dollar may be a lackluster counterpart for sizing up exposure. The US Dollar has been mired in a trend of weakness for over a year now, and while the prospect of reversal or a pullback could keep USD-strength as interesting, it’s frankly far away from where we’re at right now. More interesting, however, could be matching up a currency that may have a more pronounced bias of strength, and given prior trends, the Euro may hold a bit more promise than what one may muster around the US Dollar.

We looked at a setup in EUR/JPY as one of our FX setups for this week, and as prices have opened for the period, we’ve seen strength continuing to show, keeping the door open for bullish continuation in EUR/JPY. The pair is making a move towards 133.06, which is the two-month high in the pair, and a break-above keeps the door open for more topside, with targets cast towards the 134.41 Fibonacci level.

EUR/JPY FOUR-HOUR CHART: BULLISH CONTINUATION POTENTIAL

(Click on image to enlarge)

Chart prepared by James Stanley