US Dollar Price Outlook In EUR/USD, AUD/USD

Last week was big for the Greenback, as the US Dollar sank below a number of support levels on the heels of a dovish twist at the Fed. After carrying bullish overtones for the better part of the prior thirteen months, the US Dollar came into Q3 with an ascending wedge formation. Such a backdrop will often be approached with the aim of bullish continuation, and that led into breakouts in April and May as the US Dollar pushed up to a fresh yearly high at 98.33. But, the month of May was marked for change, as an outsized equity sell-off started to create worry at the Fed, and as the door opened into June, FOMC Chair Jerome Powell offered some supportive comments that gave the appearance that the bank may be nearing a dovish posture for the months ahead. In short order, the US Dollar folded-lower as equities began to trend-up again.

At this point, the US Dollar has taken out a number of key support levels. As looked at earlier in the month, the lack of enthusiasm from buyers near resistance led to the build of another formation; this time a rising wedge. Such a backdrop will often be approached in the opposite manner as the setup looked at above – as traders look for the lack of enthusiasm near resistance to, eventually, play-through for a break of support. That happened last week as USD fell out of the bottom of that formation.


(Click on image to enlarge)

us dollar usd weekly price chart

Chart prepared by James Stanley

The US Dollar is now testing a key level at 96.03, which is the 50% marker of the 2017-2018 sell-off. A bit lower is a prior swing-low around 95.68, followed by a big level of prior support around the 95.00 psychological level. Below that, a big confluent zone of Fibonacci support potential exists from 93.86-94.30.

For those looking to sell, a pullback to find resistance at the Fibonacci level of 96.47 can open the door for such a scenario. With such a rigid level of prior support being taken-out, this can be an interesting level to continue to watch for price action to revisit.

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