(MENAFN- DailyFX) US Dollar Talking Points Talking Points:
- to start the week, but a heavy economic calendar for the next five days will likely keep the currency on the move as we wind down Q3. It's been a really interesting quarter for the US Dollar, as the currency came-in with strength that largely held for the first-half of Q3; after which an aggressive reversal has taken-over to bring back the prior 2017-2018 down-trend. With USD now showing bearish tendencies, will Q4 bring a full-on sell-off back down to key levels of 92.00 or perhaps even 90.00 on DXY?
- Going along that that move of USD-weakness, we have a bullish breakout in EUR/USD that continues to hold. This morning has brought another iteration of higher-low support from an area of prior resistance, and even GBP/USD has put in a recovery after last week's headline-driven sell-off. Perhaps most interesting over the past week, Yen weakness appears to be back and this can keep the door open for topside strategies in both EUR/JPY and GBP/JPY as we move into the final quarter of this year.
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US Dollar, EUR/USD Hold on to Big Themes as End of Q3 Nears
As we move towards the end of Q3, a number of viable themes remain across global markets and this week's will remain busy into the end of the period. Of particular interest is US data, as we have high-impact releases set for each day Tuesday-Friday. On Wednesday, we get the Federal Reserve at a rate decision that's highly-expected to bring a hike; and it would probably be far more shocking at this point if we didn't get one. But despite this well-anticipated rate hike along with very realistic prospect of another a few months away in December, . This is somewhat of an extension of a theme that became commonplace last year, as the US Dollar dropped by as much as -15% despite the Fed being pretty much the only game in town for rate hikes.
DailyFX Economic Calendar High-Impact Events for the Week of September 24, 2018 Chart prepared by
US Dollar Strength Goes on Hiatus in the Middle of Q3
After a two-month spurt of strength that started in Q2, the wide thought was that we were at the forefront of a shift; where the US Dollar could regain prior losses as both the Euro and British Pound sold-off on the back of existential fears from Italian politics or Turkey, or perhaps even Brexit. And while each of these scenarios furnished some element of weakness to the representative currency in Q3, those themes could not hold; and an aggressive reversal in the US Dollar from the middle of Q3-on has left the Greenback in a precarious position as we move into Q4.
US Dollar Daily Price Chart: Bulls Wear Down After Q3 Grind Brings Re-Emergence of Bears Chart prepared by
We looked into . The August swing-low in DXY helped to hold the lows in the Greenback for the first part of September. Each support bounce, however, grew weaker as bears began to take-control of USD , and the horizontal support combined with the lower-high resistance gave us .
Over the past week, . This has now taken place around the 95.00 level that was the May swing-high, the 94.75 area from the middle of last week; and , this time taken from the level around 94.33. This keeps the door open for bearish USD setups as we move into the end of Q3.
US Dollar Two-Hour Price Chart: Lower-High Resistance From Prior Support as Bears Take Over Chart prepared by
EUR/USD Holds Near Highs as Bulls Bring Bounce from Key Support Level
Last week we looked at , plotting higher-low support from an area of prior resistance around 1.1725. That level came into play shortly after this week's open, and prices have put in a respectable bounce since.
EUR/USD Four-Hour Price Chart: Higher-Low Support at Prior Resistance Chart prepared by
As we wind down the end of what's been a really active Q3 in EUR/USD, the big questions is whether . At this point, the Q3 high that was set in July has helped to hold the bullish September advance, and that takes place around 1.1791. But buyers have shown no signs yet of letting up, and if we do take-out this high ahead of the Q4 open, the end of the year brings a set of strong scenarios for the single currency after a very strong six-week run.
EUR/USD Daily Price Chart: Q3 Brings Capitulation of Weakness and a Re-Emergence of Strength Chart prepared by
GBP/USD Comes Back After a Gnarly Close to Last Week
We looked into this on Friday . As we move into Q4, this will likely remain as a huge driver to GBP , as we still lack clarity or any element of certainty towards what type of deal the UK may actually be able to strike with the EU. We discussed this earlier in September, and after last week's example, .
Nonetheless, the bullish bias GBP/USD remains. . Bulls have since taken over and we're now almost 100 pips higher. This support zone runs from 1.3034-1.3065; but any trader working with setups around GBP needs to be armed for strong moves, in either direction, as tensions remain high and clarity remains low.
GBP/USD Four-Hour Price Chart: Cable Sell-Off Stalls at Key Support 1.3034-1.3065 Chart prepared by
Yen Weakness as a Primary Theme as we Move into Q4
One of the larger takeaways from the past two weeks has been , and this comes even as the US Dollar goes through its own bearish patterns. USD/JPY is holding at two-year-highs, and this is a good illustration of that fact, with JPY weakness outpacing that which has been seen in the Greenback as we move towards the end of Q3.
USD/JPY Four-Hour Price Chart: Yen Weakness Comes Back with Consistency, Even Against a Weak US Dollar Chart prepared by
EUR/JPY Bullish Potential as Euro Strength, Yen Weakness Show Up
As we've been discussing, that theme of Yen-weakness would likely be more attractive elsewhere as USD goes through its own gyrations. Last week we looked at , and that setup remains of interest as we wind down Q3. At this point, EUR/JPY has caught support off of a key at 132.05, and this had previously helped to set the Q3 high. That support has held into this week's open and prices are now re-approaching last week's high above the 133.00 level.
EUR/JPY Eight-Hour Price Chart: Last Week's Support Bounce into Fresh Q3 Highs Chart prepared by
GBP/JPY Bounces From a Big Level
We looked into , drawing attention to a really interesting level that's been in-play for some time. This is the price of 147.04, and we saw a double bottom formation form here in Q4 of last year. We've seen multiple inflections around this price since then, most recently in July as we came into August when this price helped to set the swing-high ahead of an aggressive bout of selling.
Bulls ran through this level last week, but the Friday pullback saw prices drop right to this price. After a hold on Friday and through the weekend into this week's open, bulls pounced and that level remains as the most recent iteration of higher-low support. This keeps the door open for topside strategies with bulls pushing towards the 150.00 in the pair as we move towards the end of Q3 and the open of Q4.
GBP/JPY Eight-Hour Price Chart: GBP/JPY Sell-Off Catches Support at a Big Level of 147.04 Chart prepared by
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--- Written by James Stanley, Strategist for DailyFX.com
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