US Dollar, EUR / USD, GBP / USD, USD / CAD Talking Points:

  • Next week, the FOMC will make a quarterly rate decision in which we will also see the bank’s updated forecast and forecast.
  • The big question is whether the Fed will begin to move towards reducing asset purchases. The main drivers for the past week were the CPI on Tuesday, retail sales on Thursday and consumer sentiment data from the University of Michigan on Friday, with the net result being the strength of the USD.
  • The analysis contained in the article is based on Price action and graphic training. To learn more about price action or chart patterns, check out our DailyFX Education section.

It’s shaping up to be a big week for the US dollar. As the currency spent the first few days of the week continuing the range that had been built before, Thursday’s price action saw the bulls make a move and this continued through Friday, with a severe run through resistance and to new September highs.

The big driver for next week is the FOMC, and that probably plays a role in that. Inflation data was released on Tuesday and for the first time since October of last year it was printed below expectations. This has given hope that inflation could be transient as the Fed claims. But, on Thursday, a really strong beat in retail sales seemed to undermine these projections, and this movement continued until Friday, when a University of Michigan Consumer Sentiment Report gave the uptrend another boost.

To learn more about the FOMC, to verify DailyFX Education

At this point, the USD is testing a notable resistance level at 93.19. This is the July monthly high that ended up showing resistance over a few different iterations in August. Beyond that price, 93.42 remains relevant as it was the first quarter high, and after that we have 2021 high in sight, plotted at around 93.73.

On the greenback’s support side, earlier resistance can now function as a possible ‘s1’ zone and it ranges from around 92.80 to 92.90. If the dollar pulls out to start trading next week, this becomes an area of ​​interest for further bullish scenarios.

A little lower on the chart is the confluence area around the 92.46 level, which helped catch support this week, after which the 92.20-92.26 area kicks in.

Eight Hour US Dollar Price Table

Graphic prepared by James stanley; USD, DXY on Tradingview

EUR / USD tests the large zone

This movement in the strength of the USD on Friday helped push the EUR / USD down towards a large support area, stretching from the Fibonacci levels at 1.1709 and 1.1736. This area has been in play in several important ways dating back to August 2020 when it helped establish support and then again at the end of the first quarter when it helped score the pair’s low and who held. until sellers are able to push below last month.

To learn more about Fibonacci, to verify DailyFX Education

But this bearish breakout was short-lived and price action quickly picked up. EUR / USD eventually found resistance in the same 1.1900 area that held the July high and buyers have taken control since.

With prices now touching this area of ​​support, the door can be opened for a quick withdrawal game. But, if the USD’s strength continues during and perhaps even after the FOMC next week, the door remains wide open for EUR / USD breakout themes. The 2021 low is at 1.1664 and a breakout opens the door for a downside to 1.1600 or maybe even to the 1.1448-1.1500 area.

EUR / USD Daily Price Table

eurusd daily price table

Graphic prepared by James stanley; EURUSD on Tradingview

GBP / USD up to the support range

The GBP / USD chart remains messy in my opinion, but it presents a bit of contrast with the EUR / USD above the USD / CAD below. GBP / USD held in a range until the end of September trading with a decent definition at both support and resistance level. Resistance was around the 1.3879 Fibonacci level that I followed while support was around 1.3729-1.3750.

This may keep the door open for continuation range setups until next week, and it could be appealing to those looking to wane this recent round of USD strength.

Four hour GBP / USD price chart

four hour price chart in gbpusd

Graphic prepared by James stanley; GBPUSD on Tradingview

USD / CAD explodes from Wedge, tests September high

As the strength of the USD improved on Friday, it turned out to be very important in USD / CAD. Prior to that, the pair was caught in a symmetrical wedge formation as prices continued to coil into an increasingly narrow range. But – this was happening relative to and above a long term support area of ​​around 1.2500-1.2622.

That wedge resolved significantly on Friday as prices erupted to push for a test of the September high. As of this writing this move has stalled, and given that I’m writing this on a Friday and running before a weekend seems unwise, a pullback to support earlier resistance could reopen the door for strategies. uptrend. . This shows around the 1.2695-1.2700 area on the chart.

Four hour USD / CAD price table

four hour usdcad price table

Graphic prepared by James stanley; USDCAD on Tradingview

— Written by James stanley, Senior strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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