USD, Gold, EUR/USD Stretching: US Dollar Price Action Setups
US Dollar Talking Points:
- It’s been a fast start to Q4 trade and already 61.8% of the 2024 bearish trend in the USD has been erased.
- Gold continues to stretch higher as markets appear to be pricing in a possible policy error from the FOMC.
- EUR/USD is now oversold on the daily and has held the 200-dma as resistance so far. But with Lagarde’s earlier comment regarding the labor market in the Eurozone, there’s justifiable bias for bearish continuation in EUR/USD as US data has shown with more strength.
Working with an overbought or oversold market can prove challenging. But, at its simplest, there’s really just three ways to go about it. And there are no wrong answers here as the interpretation and proper way forward will probably be subjective based on who you’re talking to. I have my way of treating such scenarios, but I also know that others prefer different paths, and that’s okay. I did my best to explain that during this webinar in a variety of venues as we’ve seen USD, EUR/USD and Gold all push to overbought/oversold extremes.
With price at an extreme on a relative basis, traders can either chase the move in that direction, they can fade the move looking for a reversal, or they can wait for a cleaner setup in the trend-side direction.
In the US Dollar, price has stretched up to the 104.07 Fibonacci level which has so far held the highs on the morning. RSI is overbought on the daily chart, making the prospect of chasing a bit more daunting. But, so far there’s been defense above the 200-day moving average and that can be construed as a positive sign for bulls.
Pullbacks so far have remained shallow, with the resistance looked at in last week’s webinar coming into play late last week and holding through this week’s open, currently showing as a higher-low. There’s a few points of reference above that, such as the 103.87 prior high or a swing at 103.70 that remain of interest for bullish continuation scenarios.
US Dollar Daily Price Chart
Gold
The trend in gold continues to impress and this has been a recurring theme for much of 2024 trade. But – there have been pullbacks, such as we saw with the build of the bull flag that was broken-through two weeks ago, and before that, a pullback from the 2600 level after the FOMC announcement of a 50 bp cut.
It seems that markets are pricing in a possible policy error here as the Fed remains dovish, rate cut expectations remain in-place for 2025 and US economic data, by and large, has been pretty positive.
Gold has been bullish to varying degrees since Q1 of this year when the metal began its current breakout, and there’s little reason to question that now given the fresh ATHs the printed again this morning. The question at this point is strategy, as the options of chasing or fading the move can both be seen as unattractive.
Last week showed support at prior resistance of 2685, and there hasn’t yet been much for testing around the 2700 handle. If we can see resistance play at or inside of 2750, that becomes a spot of interest to gauge bulls’ resolve while looking for a higher-low.
Gold Four-Hour Price Chart
EUR/USD
It’s been a fast and heavy change for EUR/USD so far in Q4, and there’s still no sign of bears letting up. Price has pushed into oversold territory on the daily but the only recent bounce that showed last Friday brought fresh sellers into the mix with a test of the 200-day moving average to open this week.
There is a confluent spot of support below, however, plotted from around 1.0765-1.0777. Something like that could assist with a bounce into a lower-high and, at this point, the current support around 1.0811 could be an area of interest for that scenario.
EUR/USD Daily Price Chart
--- written by James Stanley, Senior Strategist
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.
ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.
City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.
The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.
The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.
The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.
This advertisement has not been reviewed by the Monetary Authority of Singapore.
© City Index 2024