USD, EUR / USD, USD / CAD, USD / JPY Talking Points:
- Last week I saw an upward triangle U.S. dollar.. The formation then led to a bullish breakout that pushed the greenback to a new annual high.
- This is because today is the beginning of the fourth quarter and the Fed has recently warned of rate hikes as early as next year. U.S. dollar..
- Next week NFP The report is important because it is the only NFP report that the Fed sees during the September-November interest rate decision. Is the data strong enough for the Fed to make a taper announcement next month?
Today is the beginning of the fourth quarter, so I wanted to take a step back and look at the long-term charts around the US dollar.
The greenback spent the last nine months of last year selling out, but the first nine months of this year were characterized by mean reversion as price behavior traced back about 38.2% of previous sales. That 38.2% Fibonacci retracement worked yesterday on the last day of the third quarter, maintaining the highest DXY so far.
USD Weekly Price Chart
But perhaps more pressing than the resistance already in action is what the US dollar may be preparing for this quarter.
It looks like the US dollar is opening the door to break out of the mean reversion pattern shown in the first nine months of 2021 trading.The currency has been spent building for the last 5 months Formation of an upward triangle – This is often approached for the purpose of a bullish breakout. And before the start of the fourth quarter, the breakout began to take hold, prices jumped beyond this resistance to the 2021 highs and eventually found the Fibonacci-level sellers mentioned above.
In addition to this, the Fed’s stance of moving away from the ultra-loose policies that have suspended the background since the coronavirus entered the equation can remain bullish at the start of the final quarter of this year.
If you need a complete forecast, John Kicklighter handled the fundamentals when we looked at the technology in US dollars for the fourth quarter forecast from DailyFX.
USD daily chart
May be deeper bearish EUR / USD
For a bullish US dollar strategy EUR / USD It can continue to be a fascinating theme. The ECB is in a difficult situation with both low growth and high inflation, and the Fed is poised for a “less loose” monetary policy, which could expose the pair to further losses.
The question is, at least in the short term, how quickly travel has been incorporated in the past month. After breaking through about 1.1900 in early September, sellers have already pushed prices to new annual lows, reaching the 1.1600 level along the way.
Below the pricing behavior is a key zone from the Fibonacci level of 1.1448 to the psychological level of 1.1500. The August swing lows taken around 1.1665 can be reused as resistance potentials and span to 1.1709 Fibonacci levels to create “zones”.
EUR / USD daily chart
USD / CAD: I’m going to give something
Bank of Canada has defeated the Fed on policy lifts, and the BoC began talking about slowing bond purchases in April. This caused the Canadian dollar to plummet again and the USD / CAD finally bottomed out just two pips above the psychological level of 1.2000.
That led to a short-term reversal theme in the third quarter, and the pair began to regain their previous losses. But during the past month and change, there was a lack of direction. The pair is built into a symmetric triangle with both low and high prices. This formation often shows digestion before potentially large movements.
As far as bias is concerned: there is long-term support that helps to cauterize the lows of that formation, which spans the attention of two Fibonacci levels, 1.2622 and 1.2635. This same zone was supported in early 2021 before resistance in April and July. The graph below is accented with green.
USD / CAD Weekly Price Chart
USD / JPY tests great resistance to start the fourth quarter
Given the dynamics of rates, it ’s circle And in turn, USD / JPY.. The theme was fully exhibited in the first quarter and the Fed didn’t even mention higher interest rates. This was a market that was trying to confront what was thought to happen inevitably. And, albeit early, the call doesn’t seem wrong, as the Fed began laying the groundwork for what many were looking for earlier this year.
This keeps the top side of the USD / JPY interesting, but there is only one problem. It is a huge resistance zone that has maintained its highest ever in 2019, 2020 and 2021. This zone has psychological levels of 111.61 and 112.50. If the bull can break through this zone, there may be plenty of room to run upwards.
However, to achieve this, we need to make sure that rates continue to rise in the United States. This also means that we need to review some strong data at the beginning of the fourth quarter to support the theme.
USD / JPY Weekly Price Chart
Written by —- James Stanley, Senior strategist For DailyFX.com
Contact and follow James On Twitter: @JStanleyFX
Fourth Quarter USD Price Action Settings: EUR / USD, USD / CAD, USD / JPY
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