Talking Points on the US Dollar: The US Dollar made a good start to the day, surging back up to resistance. This is an update to the Analyst Pick from Friday, which focused on setups in the USD. With Jackson Hole and the September FOMC projected to be the next big drivers, ranges may stay near-term and below. With that backdrop in mind, I look at a handful of different approaches to approach the USD. With the start of the third quarter, DailyFX has released new quarterly forecasts. The link below will get you set up with the USD forecast: We’re now in the second and third quarters of this year, and the first half of the year left a lot to be desired when it came to volatility. Few predicted that companies like Gamestop, AMC, and Bed Bath and Beyond would dominate the news this year, but here we are. Perhaps more surprisingly, meme coins like Dogecoin have made a big splash in the crypto world, and there looks to be a lot of unanswered questions. The US Dollar has formed a range in the foreign exchange market for the most part. To be sure, when the year began, the currency was stuck in a downward trend. When the door to 2021 opened, however, prices were already at a significant level of support, which played out in Q1, with a big topside rally in the month of March. The currency was driven right back down to that major support zone, straddling the 90-handle on the chart, in the first two months of Q2, as a clean and consistent sell-off pushed the currency right back down to that big support zone, straddling the 90-handle on the chart. Bears were unable to break through once more, and the currency was able to maintain above support ahead of the June FOMC rate decision. The US Dollar exploded with vigour after the June FOMC rate decision, pushing out to a new monthly high. Following that, a pullback towards higher-low support was met with a positive response, and prices broke out once again, reaching a new two-month high just before last week’s NFP data. James Stanley’s chart of the US Dollar’s daily price; USD, DXY on Tradingview Shorter-term US Dollar The US Dollar surged ahead of last week’s employment report, hitting a new two-month high shortly before the data was released. And, while the headline number beat forecasts, the unemployment rate unexpectedly increased, highlighting the Fed’s recent attention on the labor market. Despite the fact that inflation has risen over the Fed’s targets and forecasts, they have maintained that it is only temporary and have instead focused their attention on the employment mandate. With this surprise increase in the unemployment rate, we’re even further away from the Fed’s goal of “full employment,” which could allow the bank even more time to maintain its ultra-loose monetary policy. The US Dollar softened as a result of the NFP report, and the trend persisted over the July 4th vacation, with prices sliding down near the 92 handle on DXY. However, once US markets reopened, the trend of USD strength resurfaced, with the Greenback jumping back up to near-term resistance. James Stanley’s two-hour price chart for the US dollar; USD, DXY on Tradingview Setups that Work on Both Sides of the Dollar Following last week’s NFP data, I looked into a number of settings, and today I’m going to focus on setups that may be used on either side of the US Dollar. As such, I’m looking at EUR/USD below for those expecting the USD to continue higher, possibly testing the March swing high. Alternatively, I recommend checking at NZD/USD below for investors willing to sell this strength on the assumption that the USD will remain stuck inside of the Friday inflection point. EUR/USD This morning, the EUR/USD made a new two-month low, which, together with the 1.1700 support zone lurking below, keeps this pair as one of the more appealing venues for a continuation of USD strength. The 1.1965-1.2000 zone was only reintroduced a few weeks ago, but sellers made quick work of it during the FOMC rate decision, and price activity hasn’t looked back since. Last Friday, I suggested a lower resistance zone around the 1.1900 handle, which came into play this morning before bears reappeared. Price Chart for EUR/USD for the Last Two Hours James Stanley created the chart; EURUSD is available on Tradingview. The longer-term chart is more appealing here, as the 2021 low is located in a zone of support around the 1.1700 handle, which closely resembles the USD chart above. The daily chart also shows a similar range in 2021 trade so far, which is extremely comparable to the US Dollar background examined earlier. In the short term, while EUR/USD did make a new low this morning, many other major pairs did not; this illustrates the additional weakness that the Euro could bring to the pair, in addition to USD strength, if that scenario occurs. James Stanley created this EUR/USD Daily Price Chart; EURUSD on Tradingview NZD/USD It’s difficult to find an appealing venue to fade the broad-based strength that’s been on display since the FOMC. But, with a little deduction, we can start to line up several plausible candidates for such a situation, and NZD/USD is one of them. What makes the NZD/USD such a unique currency pair? A progression of higher-lows. The low point for NZD/USD came from the FOMC rate decision on June 18th, whereas many other majors continued to run in the aftermath of the FOMC. While USD strength has remained unchanged, last Friday’s swing-low was somewhat higher than the FOMC inflection point, something that few other major currencies can claim right now. James Stanley’s NZDUSD Daily Price Chart; NZDUSD on Tradingview Price action has spent the last few hours attempting to create support off of the psychological level of.7000. A Fibonacci level around.6950, which helped to form last week’s higher-low, is close below, and this would be around the bottom of the recent range, keeping the door open for mean reversion bets. NZD/USD, on the other hand, can be an appealing alternative for investors wishing to exit USD strength. James Stanley’s two-hour price chart for the NZD/USD; NZDUSD on Tradingview —- James Stanley, Senior Strategist at DailyFX.com, wrote this article. James Stanley can be reached via Twitter at @JStanleyFX./n
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