US Dollar Price Action Setups: EUR/USD, GBP/USD, AUD/USD, USD/CAD

• Its been a busy few weeks across markets and this week brings the Non-Farm Payrolls release on Friday of this week, keeping the USD in the spotlight.

• Today has seen a noticeable reversal as theres been considerable focus on inflationary pressures in US headlines. I started off the webinar by reading recent remarks from Warren Buffett, FOMC member Robert Kaplan and US Treasury Secretary, Janet Yellen. Each had some type of comment towards higher rates and/or stronger inflation.

The US Dollar is showing a quick spurt of strength this morning, helped along by an earlier comment from US Treasury Secretary, Janet Yellen, who remarked that the US may need to hike rates in order to avoid an overheating economy.

One simply needs to look at todays chart of Dogecoin to understand what Ms. Yellen is speaking of.

But, we also looked at charts of Copper, Corn and Lumber – all of which remain in amazing bullish runs which, consequently, raise prices given the importance of these raw materials. Up to this point, Powell and the Fed have said that they feel this is transitory. Markets, however, dont appear so sure of that premise.

In the US Dollar, the currency started off Q2 with a very noticeable bearish move, erasing a large portion of the Q1 gain. But last Friday brought a big day of strength for the USD, and Monday saw those gains pair before another bullish flare this morning.

At this point, the US Dollar is holding the 50% retracement from the Q1 Fibonacci setup, which keeps the door open for bearish swings. Shorter-term, however, could begin to justify the bullish argument, but as I shared in the webinar, I remain bearish to go along with the Q2 Technical Forecast for the US Dollar.

EUR/USD: SUPPORT UNTIL IT ISNT

EUR/USD has moved back to a very key zone on the chart, spanning from 1.1965-1.2000. This zone has been in-play in multiple ways over the past eight months, most recently as support when helping to hold the lows a couple of weeks ago.

At this point, prices are back to the 1.2000 handle, and as I had shared in the webinar, this could be a support play, particularly for those that are looking for USD-weakness. For those that are bearish EUR/USD or bullish USD, breakout potential exists with a breach of the psychological 1.2000 handle in the pair.

Theres a pretty clear case of a psychological level functioning like a brick wall in Cable. The 1.4000 level has been touched multiple times since early-March, with each test faltering. The most recent iteration took place as that 1.4000 price was confluent with the underside of a trend channel. I had looked at that setup in the webinar a couple of weeks ago.

More recently, bears have been making a mark in Cable and when I looked at this in the mid-week check-up last Wednesday, I remarked that I thought GBP/USD would touch 1.3800 before itd test 1.4000 again. And later in the week, the 1.3800 level came back into play.

As I shared in this webinar, Im looking at GBP/USD with a bearish bias, and possibly as one of the more interesting ways to look for USD-strength if that scenario takes hold.

If we see USD-strength, there‘s like a rates argument doing some of the pushing. And if that’s the case, I believe on the currencies thatd be vulnerable to such an effect would be the Australian Dollar.

AUD/USD is in an interesting spot. The pair was rejected at the .8000 big figure in late-February, and since then theres been a change in behavior as the pair has moved into a mean reverting state with a slightly bearish bias. Even with USD-weakness firing through April, AUD/USD adhered to previously defined resistance. If we do end up with a strong US Dollar, the short side of AUD/USD could be fairly attractive.

Back on the side of USD-weakness, and I like USD/CAD. This became more interesting at the recent Bank of Canada rate decision when the bank warned that they were looking moving away from pandemic policy. This would represent the first major Central Bank in doing so, with the BoC leading even the FOMC.

This provides motive for CAD-strength and, if we do see USD-weakness coming back, that could be a case of divergence to work with. The USD/CAD chart highlights some breakdown potentially off of 2017 and 2018 swing lows.

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