Last week our analysis yielded a net profit of 351 pips. Our long-term Canadian dollar range trade bounced back to stop us out at break even, but our Yen position rose in our favor for 151 pips. Most notably, we picked the top on Euro as the pair hit our target at 1.60 for 200 pips in profit, only to collapse immediately after. Our stop-loss on the New Zealand Dollar was hit for a loss of 77 pips, a set-back easily countered by our other trades. Looking at the week ahead, we see notable changes in EURUSD, USDCAD and NZDUSD while GBPUSD looks to have found a bias.
[B]EUR/USD[/B]
[B]Euro crumbles following 1.60 Test[/B]
Last week, we concluded that EURUSD was positioned well at 1.5800 for a test of the psychological level at 1.60. Our analysis proved correct, yielding 200 pips in profit. Euro bulls lost all momentum following the test at the all time high, with EURUSD dropping sharply lower to break through the upward sloping trend line we have been following since February.
We have changed our bias to bearish. The pair is currently showing a decisive Three Black Crows pattern to further validate the bearish view. The decline has stalled ahead of 1.5560, offering poor risk-reward parameters to enter short at the current price. Rather, we will wait for a retrace to just below 1.5800 amid past price congestion to sell the pair with an eye on downside to just above 1.5340.
[B]
EUR/USD Trading Strategy[/B]
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Short EURUSD on retrace to 1.5800
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Set stop-loss just above all-time high near 1.6022
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Set target above swing low at 1.5340, risking 222 pips to gain 460.
For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.
[B]GBP/USD
Sterling Looks to Attempt a Another Rally[/B]
Last week, we did not see a clear signal on GBPUSD and opted to remain on the sidelines. We identified the pair as trading near an established pivot level at 1.9970. This had acted as support or resistance at various points in recent price action. GBPUSD has now cemented the level as significant resistance, oscillating between this and a downward sloping trend line (see chart below).
Currently, the GBPUSD has shown a Bullish Engulfing pattern. Adding further to the upside argument, we are seeing an upward-sloping support line intersecting with the previous resistance line, suggesting last week to have been a break-out from a triangle pattern. That said, current positioning does not offer attractive risk-reward parameters for an entry. We will look for a pull back to 1.9760, a multiple support/resistance level, to enter long. The most recent top at 1.9970 was largely symmetrical with the 04/04 Inverted Hammer top. We will look for the next bullish run to test resistance in a similarly symmetrical fashion with the top on 03/27.
[B]
GBP/USD Strategy
[/B]
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Long GBPUSD on a retrace near 1.9760
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Set stop-loss below 1.9650 past recent wick lows
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Set profit target near 2.0090, aiming for a symmetrical test of the 03/27 top, risking 110 pips to gain 330.
For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.
[B]USD/JPY[/B]
[B]Yen continues to retreat, but event threatens the rally[/B]
Last week, we advocated buying USDJPY on a retrace from 103.69 to 102.90, citing a confirmed Hammer candlestick. Our analysis proved correct, as the pair pulled back to the entry point and then proceeded to rally, closing at 104.41 for the week and yielding 151 pips in profit.
USDJPY is currently showing a bullish Three White Soldiers candlestick pattern, suggesting further upside. That said, we must be cognizant of the barrage of US data due this week. With USDJPY closely correlated to risk trends, the pair may see significant volatility in the coming days. We will revise our target to a more modest 105.19 and continue holding long. Conservative traders may opt to take profit here and wait for event risk to pass, or move their stop-loss to break-even at 102.90.
[B]USD/JPY Strategy
[/B]
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Hold Long USDJPY from last week’s entry at 102.90.
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Based on individual risk tolerance, either retain stop-loss at 101.40 or move to break-even at 102.90
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Revise profit target to 105.19 near the 01/23 wick low.
For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.
[B]USD/CAD
Long term trend line back in play[/B]
Last week, we opted to continue holding USDCAD short from below 1.0250 looking for a test of the range bottom. We moved our stop to break-even to contain the risk of an upside reversal. This proved wise, as USDCAD rallied to hit our stop-loss. We left the trade with no gains, but suffered no losses.
Recent price action has suggested an upward-sloping trend line from the 11/07/07 low. The pair now finds itself back at this support level having given back about half of last week’s gains. Our bias has shifted to bullish, but we will wait for confirmation with a close above support and a bullish reversal candle prior to entering a trade.
[B]
USD/CAD Strategy[/B]
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Long USDCAD above trend line support on confirmation of a reversal.
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Set stop-loss near 0.9983 below recent wick lows
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Target a return to the range top at 1.0250, risking 97 pips to gain 170.
For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.
[B]AUD/USD
Reversing Lower From 0.9500 Double Top[/B]
Last week we identified a downward-sloping resistance line connecting recent highs for a triple top. This looks to be a significant hurdle to further upside, and we opted to remain flat. AUDUSD broke past this point temporarily to hit the 0.9500 psychological resistance level, only to crash lower and stabilize above the 0.9300 level.
The pair is showing to consecutive Long Black Candles, a strong indication of a bearish bias. As we mentioned last week, we see AUDUSD retracing lower near 0.9200 again. Still, we will opt to take a short position. AUDUSD has been trading along an established bullish trend since August of last year. The yield differential is also resoundingly in favor of the Australian dollar. With those considerations in mind, we would rather wait for a long entry to present itself rather than trade counter-trend.
[B]
AUD/USD Strategy[/B]
We remain flat as we wait for an entry point to present itself.
For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.
[B]NZD/USD[/B]
[B]Trend Line Broken, Further Downside Looms[/B]
Last week, NZDUSD decisively broke through significant support marked by an upward-sloping trend line established in August of last year, hitting our stop loss above 0.7773 for a loss of 75 pips.
The pair is now showing two consecutive Long Black Candles, a strongly bearish signal. We will look to go short from here, targeting past price congestion near the 01/07 low of 0.7604.
[B]NZD/USD Strategy[/B]
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Short NZDUSD below 0.7850.
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Set stop loss at 0.7950 above trend line support-turned resistance.
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Set target near 0.7604, risking 100 pips to gain 246.
For more resources on the NZDUSD, please visit the DailyFX New Zealand Dollar Currency Room.
[B]NOTE: [/B]Unless otherwise specified, all trades are closed at the end of the trading week.
[I]To contact Ilya regarding this or other articles he has authored, please email him at <[email protected]>[/I]