Last week saw extended gains on our multi-week strategies for GBPUSD and NZDUSD. The Pound short trade hit its target to yield 342 pips in profit, as did the New Zealand Dollar short we had been holding for 3 weeks to yield an additional 110 pips since last week (323 total on the trade). A tight stop-loss on our Australian dollar long position kept losses to just 64 pips as the pair broke past support, detracting negligibly from overall performance. The coming week will prove to be most interesting, as we have finally identified the makings of a sound signal on the Euro after watching the pair spend weeks mired in a range.
[B]EUR/USD
Ready for a fall?[/B]
Last week we noted that EURUSD has been locked to a range between 1.58 and 1.54 following a feeble test at 1.60. While we maintained that the pair’s overall bias favored the downside, we remained on the sidelines until the pair showed a clear directional signal.
This week, that signal may have finally arrived. Friday had EURUSD close below 1.54 showing a strongly bearish Three Outside Down candlestick formation. An upward sloping trend line that has held up price action since August of last year lies closely below near the 1.53 level. Should this break, the bearish trend is likely to accelerate with a move below the 1.50.
[B]EURUSD Strategy[/B]
-
Short EURUSD near 1.5300 following a close below trend line support.
-
Set stop loss near 1.5506.
-
Set profit target near 1.4870 at triple top resistance-turned support, risking 206 pips to gain 430.
For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.
[B]GBP/USD
Channel pays out, but triple bottom contains downside[/B]
Having initially shorted GBPUSD at 1.9830 for 133 pips in profit, we were looking to re-establish the trade below 1.9750 last week as the pair re-tested resistance at the top of a downward-sloping channel. The trade worked out as intended, reaching as low as 1.9408 to book add 342 pips to our equity.
This time around, we look on the GBPUSD downtrend with a bit less confidence as the pair has reached what could prove to be a triple bottom support level above 1.9400. The pair is showing indecision with a Long-Legged Doji candlestick, so we will remain on the sidelines for the time being as we wait to see what happens in the next day or two to guide our thinking.
[B]GBP/USD Strategy[/B]
We remain flat, waiting for confirmation. Updates will be posted throughout the week at the Candlestick forum.
For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.
[B]USD/JPY
Dollar advance continues[/B]
We initially took a flat stance on USDJPY last week. The pair showed a Bearish Engulfing, but the bearish candle’s high did not exceed that of the previous day, making for a less-than-ideal setup. We also identified an upward-sloping support line, adding further to our desire to see confirmation of a bearish reversal prior to taking action. Patience proved to be the prudent option. The trend line held, and USDJPY gapped to show a massive Bullish Engulfing pattern that broke through resistance below 106. In an update posted on the Candlestick Forum, we suggested going long near on a pull-back below 105.00 to target 108.40.
As it happened, USDJPY rallied precisely to our target but failed to dip low enough to trigger entry. 108.40 is a significant multiple support/resistance level, with a Spinning Top candlestick now showing right below it. By itself, this means rather little. A Spinning Top requires confirmation on the next candle to be interpreted with confidence. We will continue to monitor price action as we wait for the current candle to close. As before, we will offer updates via the forum as things develop.
[B]USD/JPY Strategy[/B]
We remain flat, waiting for confirmation. Updates will be posted throughout the week at the Candlestick forum.
For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.
[B]USD/CAD
Gathering bullish momentum[/B]
Last week we saw USDCAD put in a decisive Three White Soldiers candlestick formation, a strong bullish pattern. We had some reservations going long outright having also identified the pair as trading right at a downward-sloping resistance line that had contained upside momentum since January. Price action has since surpassed resistance, but choppy price action following the break failed to yield a definitive signal to trigger a trade.
Looking now, USDCAD is trading squarely between downward-sloping resistance-turned-support and a daily pivot point resistance level at 1.0377. This also marks the highest high of the multi-month range that has dominated USDCAD price action since January. Current positioning does not offer attractive risk-reward parameters, and we have yet to see a recognizable candlestick pattern from which to draw conclusions about future movement. As such, we will not attempt to force a trade. Rather, we will wait for USDCAD to offer a better set-up before committing to a position. That said, the initial trend line break gives the pair a bullish bias.
[B]USD/CAD Strategy
[/B]
We remain flat, waiting for further confirmation. Updates will be posted throughout the week at the Candlestick forum.
For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.
[B]AUD/USD
Bullish trend falters[/B]
Last week we continued to apply a multi-week bullish strategy above 0.95, aiming for the pair to return to the top of May’s range near 0.9650. This time around the approach missed the mark. Following a reversal lower to fill our trade at 0.95, AUDUSD rally broke lower to hit our stop at 0.9436 for a loss of 64 pips. The collapse was fueled by a dismal May unemployment report showing the economy failed to add 13.5k jobs as expected to shed -19.7k instead.
A re-evaluation of recent positioning reveals a Rising Wedge bearish chart formation. Extending wedge support backwards corresponds to an upward-sloping line that has held up since August, adding all the more significance to its penetration. The decline stalled above pivot point support near 0.9320. We expect a bounce here to retest trend line support-turned-resistance offering entry for a short trade.
[B]AUD/USD Strategy[/B]
-
Short AUDUSD on a retest of trend line support-turned-resistance below 0.9470.
-
Set stop loss near 0.9542. -
Set target near 0.9320, risking 72 pips to gain 150.
For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.
[B]NZD/USD
Downtrend pauses at key support[/B]
Last week, we continued holding a short NZDUSD position opened below resistance of a downward-sloping channel at 0.7860. The trade was up 213 pips by the beginning of the week, but we saw further downside momentum and opted to hold for a profit target at 0.7560. NZDUSD validated our assertions, trading through our limit to hit the channel bottom at 0.75 and yielding an additional 110 pips for a total profit of 323 pips on the overall position.
Having reached our profit target, we will take this opportunity to re-evaluate the broader picture for NZDUSD. Price action is now at 0.7500, which corresponds with the current channel bottom as well as a long-term bullish trend line that has guided NZDUSD higher since July of last year. Friday’s trading formed a Long-Legged Doji (see zoomed-in view below), suggesting indecision. With the fundamental picture decidedly bearish (see article), we will remain on the sidelines for now as the pair finds direction around support.
[B]NZD/USD Strategy[/B]
We remain flat, waiting for further confirmation. Updates will be posted throughout the week at the Candlestick forum.
For more resources on the NZDUSD, please visit the DailyFX New Zealand Dollar Currency Room.
[B]** NOTE: [/B]All open positions are closed out at the end of the trading week unless otherwise specified.
[I]To contact Ilya regarding this or other articles he has authored, please email him at <[email protected]>[/I]