Last week saw us hit the targets on multi-week New Zealand Dollar and British Pound shorts as well as a quick Swiss Franc range trade. A sudden breakout erased the bulk of the gains on our Australian Dollar long-term position, though we still closed out at a modest profit. All told, our open trades closed out with the majors moving over 1100 pips in our favor. The coming week promises new beginnings – we enter the week flat eyeing new setups with the dollar positioned at key technical levels against most major currencies. The Euro pairing is of particular note as price action sees bulls and bears wrangle over a support level in effect since August. A break here could open the door for a rapid sell-off to re-test 1.50.
[B]EUR/USD
Strategy: Bearish below 1.5300, Targeting 1.5007[/B]
We have kept to a bearish bias on the EURUSD since the pair’s feeble test at 1.60 and subsequent descent into a range between the 1.58 and 1.54 levels. Last week, the pair faltered following rally to 1.58 once again, finding support at the 23.6% Fibonacci retracement of the 02/08-04/22 rally at 1.5645. We opted to wait for a pull-up to improve risk reward parameters for a short aiming for the 38.2% Fib support at 1.5417. A reversal to trigger entry did not materialize – the EURUSD decline continued lower to close last week below the 1.54 level. We now take a broader perspective on the pair, noting that Friday’s low falls along a supporting trend line that has held since August of last year. A Fib drawn along this move (08/17/07-04/22) identifies 1.5397 as the 23.6% retracement level and further reinforces support around this area. That said, Friday’s close is the bears’ boldest challenge yet to overcome this hurdle ahead of an outright sell-off. We will look for a close below trend line support to go short, initially targeting the 38.2% Fib at 1.5007.
For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.
[B]GBP/USD
Strategy: Bearish below 1.9720, Targeting 1.9400[/B]
Last week, we opted to short GBPUSD below 1.9760, a confluence of technical resistance formed by the 61.8% Fibonacci retracement of the 02/20-03/13 rally and the top boundary of a downward-sloping channel. Price action validated our decision as the pair descended lower to test near our target near 1.94. Downside momentum lost steam here as GBPUSD ran into a support level that has held up to four previous tests since January. The pair put in a bottom and pulled up higher towards the channel top at 1.9720. Fib resistance is closely nearby at 1.9764, marked by the 23.6% retracement of the 11/09/07-01/22 decline. We continue to retain our bearish bias as this clustering of resistance should prove to be a substantial hurdle for an up-side push. We will look to short the pair 1.9720, risking an extension of bullish momentum to test below 1.9770 prior to another decline to challenge the 1.9400 level.
For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.
[B] USD/JPY
Strategy: Bullish against 107.38, Targeting 110.00[/B]
Last week, we saw a bullish trend line guide USDJPY price action higher through the 50% Fibonacci retracement of the 12/27/07-03/17 decline near 105.20 to test the 106.00 level. We suggested going long on a pull-back to the 105.00 area targeting the 61.8% Fib level below 107.40. Instead, USDJPY marched on to break past 107 to stall ahead of daily pivot point resistance at 108.54. We see likely consolidation above the 61.8% Fib level prior to another bullish swing aiming to test the 110.00 mark. Alternatively, we may see USDJPY give up the 107.00 handle in the short term with a pull-back to trend line support in the 105.40-50 area before further upside materializes. In either case, we see the bullish bias as having been firmly established at this point.
For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.
[B]USD/CHF
Strategy: Bullish against 1.0203, Targeting 1.0545[/B]
Last week we noted that the Swiss Franc has remained range-bound in trading against the US dollar since the beginning of May, oscillating between the 38.2% and the 61.8% Fibonacci retracements of the 02/13-03/17 decline. With USDCHF positioned towards the bottom of that range, we advocated buying the pair above 1.0203, aiming for another test at the range top. Price action proved supportive of this scenario, hitting our target on Friday. We are now seeing a decline back towards the middle of the range. As we did last week, we will look for an entry at the range bottom near 1.0203 for a long position to trade with the overall bullish bias for another run at the 61.8% retracement level.
For more resources on the USDCHF, please visit the DailyFX Swiss Franc Currency Room.
[B]USD/CAD
Strategy: Bullish Against 1.0200, Target 103.50[/B]
Canadian dollar price action has remained choppy in recent weeks, seeming to negate Fib levels indiscriminately and making directional bets a risky proposition. Most recent trading saw USDCAD rushing from below parity through multiple levels of Fib resistance to close above downward-sloping resistance line that had capped the upside since January. Seeing this last week, we changed our bias from neutral to bullish and suggested to buy the pair above 1.02. Following a brief rally to test the 103.00 level, USDCAD pulled back to trend line resistance-turned-support to start this week at largely the same place as the last. This level is reinforced by the 61.8% Fibonacci retracement of the 08/16/07-11/07/07 decline that preceded the current range. We see USDCAD find support here, with the next bullish run aiming to test the January high at 103.50.
For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.
[B]AUD/USD
Strategy: Bearish against 0.9470, Target 0.9330[/B]
We had maintained a bullish bias on AUDUSD position since May 12th when the pair pulled back to the 61.8% Fibonacci of the 02/28-03/20 decline at 0.9287. The bullish trend had been guided by bullish trend line dating back to August, with each subsequent test offering an excellent buying opportunity as the pair continued to rally to 24-year highs above 0.9600. We maintained that as long as price action stayed above the trend line, the bullish trend was in effect. Last week finally saw breakdown of this pattern. Price action since March had been forming a Rising Wedge bearish reversal formation that broke through mid-week following a dismal May employment report showing the economy failed to add 13.5k jobs as expected to shed -19.7k instead. The wedge’s lower boundary corresponds with the long term support we had been looking at. This has now been breached, causing our bias to change to bearish. We will look for a retrace to trend line support-turned resistance near 0.9470 to short the pair. This is now reinforced by the 38.2% Fibonacci retracement of the most recent 06/09-06/12 decline. We will target last week’s low near 0.9330.
For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.
[B]NZD/USD
Strategy: Bearish against 0.7613, Target 0.7427[/B]
We have been holding NZDUSD short since a re-test of the trend line support-turned-resistance near 0.7940. The pair followed through as expected – a high wick tipped the trend line before NZDUSD collapsed lower. We further noted that the bearish trend was being guided lower by a downward-sloping channel. The trade had moved in our favor, trading through support the 38.2% Fibonacci retracement of the 08/17/07-02/27 rally at 0.7612 following a dovish RBNZ rate decision. Last week, we resolved to take profit on the trade on a test at 0.75, aiming to book 440 pips in profit from our original entry. This analysis was validated as NZDUSD dipped past 0.75 to put in a bottom near the intersection of the channel’s lower boundary and the 50% Fib retracement level. We see the pair retrace to test the 38.2% Fib once again. The downtrend is likely to re-emerge here, taking the pair back to the 0.7427 mark. Alternatively, a penetration higher will see NZDUSD test the channel top at 0.7800 once again before the decline resumes. Updates will be posted throughout the week as things develop on the Fibonacci Forum.
For more resources on the NZDUSD, please visit the DailyFX New Zealand Dollar Currency Room.
[I]
To contact Ilya regarding this or other articles he has authored, please email him at <[email protected]>.[/I]