EUR/USD Caught In Congestion As USD Extends Fibonacci Support Bounce

US DOLLAR EXTENDS FIBONACCI SUPPORT BOUNCE

Yesterday saw a vigorous move priced-in to the US Dollar, as the currency opened the week by continuing last week’s sell-off, soon finding a bit of support at a key area on the chart at 96.47. This is the 23.6% Fibonacci retracement of the 2011-2017 major move in the currency, and this had come into play last week to help set the two-week low in USD.

Yesterday’s re-test of this level has led to a vigorous bounce in the US Dollar, and prices are pushing up towards fresh two-week highs around 97.31 on the chart.

US DOLLAR HOURLY PRICE CHART: FROM SUPPORT TO RESISTANCE TO OPEN THE WEEK

(Click on image to enlarge)

us dollar usd hourly price chart

Chart prepared by James Stanley

At this point, there is a case on either side of the Greenback. On a shorter-term basis, that support response yesterday is notable as the US Dollar put in a visible and quick reaction. Prices even tip-toed above last week’s resistance zone before buyers lost motivation, and this may be indicating an increased tolerance for higher-prices that could, eventually, lead to fresh highs. The key for this coming to fruition will be buyers holding higher-low support and continuing to push-higher on the chart. That has so far taken place as this morning saw a higher-low support response around the 96.90 area on the chart.

US DOLLAR TWO-HOUR PRICE CHART

(Click on image to enlarge)

us dollar usd two hour price chart

Chart prepared by James Stanley

On a longer-term basis, the big question is whether the US Dollar is close to or already has topped-out. The November high came-in around 97.70; and later in the month a lower-high came into play around 97.50. This was followed by a third-lower high in the closing days of November at 97.31, and this, when combined with the breach of the bottom-side of the bullish trend-channel that’s been in play since the September FOMC meeting, can open the door to a deeper pullback or sell-off.

Key for that will likely be the FOMC rate decision next Wednesday that continues to carry high expectations for another 25 basis points of adjustment. The hike for next week is widely expected and it would probably be a far bigger surprise if a hike did not take place. But – the guidance offered at that meeting will offer a clue to market participants as to how aggressive the Fed might be in 2019.

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