Forex Trading

US Dollar Setups Before Fed– EUR/USD, GBP/USD, USD/JPY, USD/CAD; Volatility Ahead

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The Fed will announce its first policy decision of 2024 on Wednesday. While no change in interest rates is expected, the FOMC could adjust its guidance in response to progress on the inflation front. This shift in bias could trigger large swings in FX markets, so traders should be prepared for increased volatility. A preview of this event can be found here.

In this article, we’ll set aside fundamentals and we’ll focus exclusively on the technical outlook for major pairs such as EUR/USD, GBP/USD, USD/JPY and USD/CAD, outlining important price thresholds that could serve as support or resistance in the upcoming trading sessions.

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EUR/USD has pulled back in recent weeks, guided lower by the upper limit of what appears to be a falling wedge, a bullish pattern. This technical formation could be validated if prices manage to break resistance at 1.0870. In such a scenario, we could see a move towards the 50-day simple moving average at 1.0920, followed by 1.0950.

In the event that EUR/USD continues its retracement, the first significant floor to watch can be spotted at 1.0780, which corresponds to the 100-day simple moving average. The bulls must vigorously protect this area; failure to do so may precipitate a drop toward trendline support at 1.0730. On continued weakness, the focus will pivot to 1.0650.


EUR/USD Chart Created Using TradingView

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How to Trade GBP/USD


GBP/USD has been coiling inside a symmetrical triangle in recent weeks. This chartist formation, which is composed of two converging trendlines, tends to be considered a continuation pattern. The setup is validated once prices move outside the boundaries of the triangle, with the confirmation signal carrying greater strength if the breakout occurs in the direction of the broader and prevailing trend.

In the case of GBP/USD, traders should monitor two technical zones in the coming sessions: resistance at 1.2750 and support at 1.2640. That said, a breach of support could usher in a move towards 1.2600 and then the 200-day simple moving average. Further weakness could bring 1.2455 into play. Meanwhile, a push above resistance could trigger a rally towards 1.2830 and possibly 1.3000.


GBP/USD Chart Created Using TradingView

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USD/JPY fell sharply on Monday but managed to stabilize on Tuesday, bouncing off the 100-day simple moving average near 147.40. If the rebound gains momentum in the upcoming trading sessions, trendline resistance appears at 148.20 and 149.00 thereafter. Turning our gaze upwards, the spotlight will likely be on the 150.00 handle.

On the flip side, if sellers resurface and initiate a bearish reversal, support looms at 147.40 as stated above. Looking lower, all eyes will be on the psychological 146.000 mark. While breaching this level may prove challenging for the bears, a breakdown could potentially lead to a retracement toward the 100-day simple moving average at 145.50.


USD/JPY Chart Created Using TradingView

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Change in Longs Shorts OI
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Weekly -1% -12% -6%

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USD/CAD has retreated sharply in recent days following an unsuccessful attempt at clearing trendline resistance. Throughout this downward phase, the pair has descended below the 200-day simple moving average and is currently nearing cluster support at 1.3390. This floor must hold at all costs; otherwise, a potential slump towards 1.3310 may be in the offing.

Conversely, if USD/CAD starts to stabilize and rebounds off its current position, the first obstacle in the recovery path will be the 50-day simple moving average, followed by the 200-day simple moving average. Above these technical indicators, the focus will be on 1.3535, which represents the 50% Fibonacci retracement of the November/December bearish correction.


USD/CAD Chart Created Using TradingView

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