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Short-term outlook for US dollar pairs, after the rate hike

Jason Sen

After the US Federal Reserve yesterday announced another increase in US interest rates, what action can we expect in the US dollar pairs?

USD/JPY rejected very important resistance at 113.15/25 in severely overbought conditions. The bearish engulfing candle and double top provides a sell signal. If we are lucky we will bounce from one-month trendline support at 112.65/60 for a selling opportunity at 112.90/113.20. A break above 113.40, however, is an important buy signal.
A break below 112.35 is another less-important sell signal targeting 112.15, 112.00 and support at 111.90/85. I expect a bounce from here on the first test (and then we sell again at 112.60/80).

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EUR/USD has completed a bullish inverse head-and-shoulders pattern for a buy signal. We have dipped to a buying opportunity at the neckline at 1.1735/25, with stops below 1.1680. The next support at 1.1660/50 is the last line of defence for bulls. A move below targets 1.1615/10.

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A break above 1.1810 is expected eventually (a weekly close above tomorrow would be very convenient) for the next buy signal. This would target 1.1820, 1.1840/50 and 1.1885/95.

USD/CAD tackles the 100-day moving average at 1.3050/60 today, as I write. There is a strong chance we’ll turn lower from here but short positions need stops above 1.3085. A break higher targets eight-month trendline resistance at 1.3140/50.

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Failure to beat 1.3050/60 targets 1.3010/00, then 1.2960/65. On further losses look for 1.2930/20 before the low at 1.2885/80. We then test 200-day moving average support at 1.2870/60.

AUD/USD and NZD/USD

AUD/USD reversed from three-and-a-half-month trendline resistance at 7300 to first support at 7255/50 and bottomed exactly here. Despite the negative shooting star I think the downside should be limited. It may be worth buying at 7250/40 but I cannot rule out a test of 7220/10. Long positions need stops below 7190. A break lower however targets 7150/40.

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NZD/USD is potentially forming a bullish inverse head-and-shoulders pattern. This would indicate a base is being built before a recovery through October. Look for a buying opportunity at 6630/20, with stops below 6590. The next target and support is at 6565/55.

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Holding our buying opportunity at 6630/20 allows a recovery to 6650 and strong resistance at 6710/20. A break above here is our buy signal with completion of the bullish pattern, initially targeting 6760, then 6775/85 (we should struggle here on the first tests). A move above 6795 targets 6820 and 6840/50.

Jason Sen

Technical Analyst & Trader

For more information and trading education visit Intertrader

The content of this article is the personal opinion of the author and not Intertrader. You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.

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