The US dollar decline came to a sharp halt in overnight forex trading, as the euro, British Pound, and other major currencies gave back recent gains against the US currency. Yet our technical studies suggest that this may simply be a very short-term pullback in what seems to be a larger correction, and as such, we continue to forecast US dollar weakness through the coming weeks of trade.
The Euro’s sharp reversal off of recent spike-lows of 1.3872 left us with a bullish short-term bias, and overall risks still remain for a test of previous support and the 38.2 percent Fibonacci retracement of the 1.6040-1.3870 move at 1.4700. Only a break of 1.3872 would negate our current bullish bias for the euro against the US dollar. As we wrote on Friday, “a hammer formation on yesterday’s candle suggests that this may be the start of a larger reversal—especially as recent EURUSD COT data shows that forex positioning reached an extreme through recent trade.”
Our long-term US Dollar-Japanese Yen bearish bias remains to the downside, and today’s break of key trendline and 200-day Simple Moving Average support likewise leads us to believe that the USDJPY may see further losses through short-term trading. Closing below the 200-day SMA at 106.44 reinforces this bias, and short-term targets would be set at previous spike-lows at 103.77. Discuss your own opinion of the USDJPY in our Forex Forum.
Our calls for extended British Pound/US Dollar rallies came to fruition through Friday’s forex trading, and the GBPUSD may yet continue to bounce through near-term price action. Yet today’s extraordinary intraday reversal suggests that the pair may correct before continuing to the topside, but our bullish bias remains intact on a hold of recent lows at 1.7445. Discuss the GBPUSD with other forex traders in our forex forum.
The US Dollar/Swiss Franc pair reversed sharply off of Fibonacci resistance at the 1.1450 mark, and our bias favors further USDCHF declines. RSI and other oscillators likewise reached extremely overbought levels through recent trade, and the fact that they have now turned lower reinforces our bearish bias on the trade. Next targets are eyed at previous support in the 1.0800-1.0850 range.
The US dollar/Canadian Dollar’s significant reversal off of key Fibonacci resistance at 1.0800 underlines the case for further USDCAD declines, Indeed, a hold of 1.0800 leaves our bearish bias intact, and short-term targets are set at previous support of 1.0412.
The Australian Dollar/US Dollar pair reversed strongly off of recent multi-month lows—instilling confidence in our calls for further AUDUSD rallies. Yet a similarly sharp reversal off of short-term resistance suggests that the very-short-term direction supports a re-test of support at the 0.8000 mark. A hold of 0.7900 nonetheless would keep our bullish bias intact and favors an anti-US dollar move through the coming weeks of trade.
As with other US Dollar pairs, it seems increasingly likely that the NZDUSD has set a short-term bottom at 0.6437. Next topside targets include yesterday’s open price at 0.6632 and spike highs on 9/08 at 0.6846.
