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US Dollar Price Action Settings: EUR/USD, GBP/USD, AUD/USD, USD/JPY

Talking points about the US dollar:

  • The US dollar hit a 23-month high yesterday, buoyed by higher Treasury yields, with FOMC’s Lyle Brainard noting that May would be a good time to start quantitative tightening.
  • While markets were initially geared for a 50 basis point hike plus an announcement about QT in March, the Fed only made a 25 basis point move and addressed the QT issue. A massive rally in stocks emerged soon after and that was driven into the second quarter trading. But, now that QT is back in the cards to line up with some massive expectations of a rate hike, stocks are starting to show pressure again.
  • This was the rationale for my highest trades in the second quarter, given the bearish US stock scenarios; This is in line with expectations of continued strength in the US dollar as the Federal Reserve is close to “normalizing” policy.
  • The analysis in the article is based on price movement And the chart formations. To learn more about price action or chart patterns, check out DailyFX Education Section.

The US dollar hit a 23-month high yesterday, after rising Some comments from Lael Brainard of the Federal Open Market Committee. She clearly indicated that she felt it would be appropriate to address quantitative tightening in the interest rate decision in May, something that stocks noticed very quickly, beginning to pull back shortly after those comments hit the wires. Stocks remained under slight pressure during the session and another sell-off came overnight, bringing the potential back into the equation after a very aggressive rally that emerged after the March rate hike at the Federal Open Market Committee.

The main quandary is emerging at the moment: Will the Federal Reserve lift the US economy into a possible recession? While many banks and commentators are downplaying recession risks, we’ve heard firsthand from FOMC members saying they are trying to engineer a “soft landing”. And even if he maintains maximum confidence in the FOMC, history may suggest that this will be a challenge for them. After all, it was the bank’s reliance on its faulty inflation forecasts that created this situation in the first place, with the Federal Open Market Committee continuing to say high inflation was “temporary” throughout the past year.

This allowed the Federal Reserve to neglect inflation management as stocks, cryptocurrencies, NFTs, and anything unnamed soared in value.

The pivot emerged about Powell’s re-nomination in November. During the hearing, he moved to retire from a transitional word from Federal Reserve jargon, waving a white flag of persistent inflation that, to this day, has not yet begun to cool. As a result, one or two combo markets now expect the Fed to move into uber-hawk mode for the rest of this year, and that will have a significant impact on both stocks and the dollar.

Markets are currently expecting the Fed to raise nine more times this year, for a total of 10 in 2022. In addition to the expected announcement of quantitative tightening, which Lyle Brainard just warned could come as early as May, that would be a massive turnaround. from the Federal Open Market Committee in a very short period of time. The kind of rapid change that is unlikely to allow any “soft landing”.

U.S. dollar

Perhaps the main beneficiary of this accelerating situation is the US dollar. I’ve been tracking the currency’s rally for almost a full year now, keeping the technical outlook bullish for the past few quarters as the strength of the US dollar has remained one of the cleanest topics in the macro markets. I even had I set this as my best deal for the first quarterwith a related shift to bearish stocks for the second quarter.

From the weekly chart below, we can get a good idea of ​​how clean this US dollar trade is price movement Spend a lot of that time staying within the uptrend channel.

US dollar weekly price chart

The graph was prepared by James Stanley; US dollar, DXY on Tradingview

US dollar levels

This breakout has started to pull back in the short term, and there is also a test of support at the resistance of the previous range. The US dollar has remained in a range for nearly all of March with buyers pushing the upside breakout after the April open.

Holding this range for as long as it lasts means that there are many swing points that could be re-engineered for support potential. Price action is currently at 14.4% Fibonacci retracement For a major long-term move, it was plotted at 99.34. Below that brings the possibility of support to the levels at 99 and 97.79, followed by a large support spot near the middle of the previous range, which extends from 98.32-98.45.

Four hour US dollar price chart

Four hour US dollar price chart

The graph was prepared by James Stanley; USD, DXY on TradingView

EUR/USD is testing the long-term support block

If the US dollar is to rise to new multi-year highs, it will likely need some help from the Euro to do so. The Euro accounts for more than 57% of the value of the DXY, which is the US dollar index, meaning that the US dollar will often find it difficult to prove trends that are not incorporated into the Euro.

The EUR/USD has definitely fallen sharply last year and in the early part of this year. But the price dropped to a key level of 1.0814, the 78.6% retracement of the 2017-2018 key move, and that has held the declines since then.

From a long-term base, we can see that the EUR/USD is now trading in an area that has proven problematic for the bears for the past seven years since they came back into play in March 2016.

EUR/USD monthly price chart

EURUSD monthly price chart

The graph was prepared by James Stanley; EURUSD on Tradingview

EUR/USD in the short term

The EUR/USD bears have made a boost over the past week, but notably, the pair has yet to hit a new low while the US dollar hit a fresh high. This could indicate the potential for a pullback on both topics as the EUR/USD pair approaches the key support point on the chart around the long-term Fibonacci retracement.

However, the trend is fairly straightforward and the rationale for that trend remains. The only predicament that awaits us is the long-term support area that sellers have not yet been able to calculate; But what this could create is that the Fed actually kicked off aggressive rate hike plans, which… European Central Bank It is unlikely that it will keep pace to any degree, and as markets become increasingly accepting of the fact that the Fed’s positioning will fade, there may be additional strength for the US dollar in the rate.

But, with a long-term support zone like the one we see above is often taken out with a bang as opposed to a grumble, given what’s happening in Europe with energy and the current scenario between Russia and Ukraine, the potential is unfortunately there.

The potential for a pullback in EUR/USD remains at the same level of 1.0958 I looked at last week, followed by the 1.1000 level. psychological level.

EUR/USD 4-hour price chart

EURUSD 4-hour price chart

The graph was prepared by James Stanley; EURUSD on Tradingview

The possibility of a collapse of the GBP/USD pair

From the weekly chart below, GBP/USD holds the possibility of a breakdown. Confirmed last week that evening star formation After the rebound appeared at the psychological 1.3000 level and pushed the sellers back quickly towards the bottoms. This support now looks weak, although a key psychological level like this could take a few fluctuations before giving way, and the recent bounce triggered a 300-pip rally. So, logically speaking, there is likely to be some order sitting below that level, at the moment, and that could trigger another bounce before the sellers can finally leave it behind.

British Pound to US Dollar (GBP/USD) Weekly Price Chart

GBPUSD weekly price chart

The graph was prepared by James Stanley; British Pounds / US Dollars on Tradingview

GBP/USD short term

Going down to the four-hour chart is showing a range in the GBP/USD, with resistance coming in at the 38.2% retracement of the major 2020-2021 move. Support has been holding around 1.3050 but the psychological level is a little lower and the bears do not yet seem ready for another test of this price although if they do, it could trigger a short term bounce. The bigger question is where the next lower top appears next, which could keep the door open for a new downtrend taking out that key support point that looms ominously below the GBP/USD price action.

Four hour GBP/USD price chart

US Dollar Price Action Settings: EUR/USD, GBP/USD, AUD/USD, USD/JPY

The graph was prepared by James Stanley; GBPUSD on Tradingview

Australian dollar / US dollar flies

Well I’m going to take this away, I don’t know that I fully agree with the basic argument behind the AUD/USD bullish games, especially at current levels. But, as the old saying goes, prices lead and headlines lag.

I was bearish as the pair entered 2022, largely due to price action and carry the flag which worked well in late 2021. However, Early February is when things started to turn as the pair was finding support at the psychological level of 7.000which allowed falling wedge to construct.

Falling wedges are bullish reversal formations, and while I wasn’t a fan of the basic argument at the time, price is price, and the bullish breakout of that grid opened the door to upside attributes.

And after that, it kind of took on a life of its own.

The penetration accelerated to .7400 level before backtrackingbut even when you do it is bullish background It stayed when the morning star formation appeared on the daily chart in the middle of last month, just before the Federal Open Market Committee meeting. This further extended the move that ran all the way into trade in the second quarter, which is a +650 pips reversal from the 0.7000 test in early February.

AUD/USD daily price chart

AUDUSD daily price chart

The graph was prepared by James Stanley; AUDUSD on Tradingview

AUD/USD in the short term

At this point, there is a possibility of a pullback to the psychological level of 0.7500 with a large area lurking below that, extending from .7417 to .7442.

AUD/USD four-hour price chart

Please add a description for the image.

The graph was prepared by James Stanley; AUDUSD on Tradingview

USD/JPY is preparing for the second round at significant resistance

The USD/JPY finally found some resistance.

The pair has been on a massive rally so far in 2022 and this could really extend into the past year as expectations start to grow for a hawkish Fed. I started talking about this in September of last year, after the Federal Open Market Committee (FOMC) began forecasting one rate hike for 2022; The topic has continued to thrive ever since.

I looked into it last week after USD/JPY encountered a major spot of long-term resistance.. This is around a 20-year high for the pair, around the 125.00 psychological level.

After that resistance, the resistance inflection prices fell strongly, and I wrote about it the next day while making two points of support on the USD/JPY pair. There were levels at 121.41 and 122.41, and both have since become very relevant to short-term price action.

Since then, the pair has based on each of those levels while spurting back into its long-term resistance zone.

Four-Hour USD/JPY Price Chart

usdjpy four hour price chart

The graph was prepared by James Stanley; US dollar / Japanese yen on Tradingview

USD/JPY long term

The subject of the bigger picture may not be ready yet and the fact that buyers are withdrawing before testing the resistance zone suggests that this may not be the breakout scenario for the pair just yet, but the degree to which buyers come in defending the support will highlight the speed at which that could happen.

If the corresponding pullback does not stop at the same level of 121.41, look for prices to rush towards the big figure at 120.00; Showing support here could be an attractive case for short-term reversals in the direction of the long-term trend.

USD/JPY monthly price chart

US dollar to Japanese yen monthly rate chart

The graph was prepared by James Stanley; USDJPY on Tradingview

— written by James StanleyAnd the Senior strategist for DailyFX.com

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