Last week, an empty calendar saw the market cling to losses in the Dow for directional momentum and the dollar sold off. Looking ahead, reassuring comments from the US Fed and Treasury department has seen anti-dollar momentum stalling with the majors showing similar-looking Inverted Hammer or Hanging Man candlesticks. Initial positioning suggests the coming week could bring a broad reversal of last week’s knee-jerk trading.
[B]EUR/USD
Where to from here?[/B]
Two weeks ago, we shorter EURUSD having seen an Advance Block bearish reversal pattern followed by a down candle. We opted to hold the trade through last week as a busy calendar saw satisfactory NFP results and a very timid ECB, driving the pair lower to produce a large Bearish Engulfing pattern. Although the technical picture looked favorable, an empty calendar saw the market cling to losses in the Dow for directional momentum and the dollar sold off. EURUSD price action advanced higher to hit our stop loss at 1.5857, booking 105 pips in losses.
Looking ahead, reassuring comments from the US Fed and Treasury department has seen anti-dollar momentum stall above the 1.59 level. Should the current candle close as-is it will produce an Inverted Hammer. If that scenario is to materialize, we will look for a next-day bearish candle confirmation to go short again.
[B]
EUR/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 EURUSD, please visit the DailyFX Euro Currency Room.
[B]GBP/USD
Price action choppy below resistance[/B]
Last week, we saw GBPUSD just below a multiple support/resistance area at 1.9960 below the psychologically significant 2.00 level. The downside scenario was reinforced with a Hanging Man candlestick, though our requirement of next-day bearish confirmation proved detrimental as price action shot straight downward to dramatically alter risk-reward and thereby invalidate entry conditions. Downside momentum carried through to test the 1.97, but the aforementioned fundamental forces (see EURUSD section) conspired to derail the dollar’s rally.
Current positioning does not yield a reliable candlestick signal. That said, the long upper shadow on Friday’s candle on a test of resistance suggests the bearish bias remains intact. We will continue to monitor the pair in the coming days in search of an opportune entry point.
[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.[I][/I]
[B]USD/JPY
Down move exhausted?[/B]
Last week, we wrote that USDJPY positioning suggests the bullish trend line that had guided the pair since mid-March has been broken. Writing in a mid-week update, we suggested to short the pair at 107.47 targeting a return to 105.23 upon seeing a confirmed Hanging Man candlestick. Price action validated our preferred scenario but missed our entry by a mere 5 pips, reaching a high of 107.42 after we issued the short signal before falling lower.
Currently, USDJPY appears to have found a near-term bottom above multiple support/resistance at 105.52. We will remain on the sidelines for the moment as we wait to see how the pair will react at this pivotal point. Should support be established here, we will likely see a bounce higher to re-test trend line resistance-turned-support. A break below 105.53 will target the next support above 103.00.
[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
Down channel guides consolidation[/B]
In recent weeks, we indentified USDCAD as consolidating in a large Triangle formation. We noted that resistance was overcome in the beginning of June, followed by a brief rally and retracement back to trend line resistance-turned-support. Price action has since traded lower along triangle resistance-turned-support.
We now see recent highs adhering to a downward-sloping channel guiding USDCAD consolidation. Friday’s candle shows a large Inverted Hammer candlestick. We will look for bullish close on today’s candle as confirmation to enter long.
[B]USD/CAD Strategy[/B]
We remain flat, waiting for 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
Trend line resistance continues to hold[/B]
We have been calling for AUDUSD downside since the pair broke beyond a bullish trend line that had supported price action since 8/17/07. The initial decline stalled above 0.9320. We looked for a bounce here to retest trend line support-turned-resistance offering entry for a short trade. Last week, our entry conditions were satisfied with an Inverted Hammer followed the next day by a bearish candle for a fill at 0.9549. Fundamentals upset the downside picture as June’s employment figures surprised to the upside all the while the dollar sold off across the board following the Dow. Our stop loss was hit at 0.9683, booking loses of 134 pips.
Looking ahead, we see AUDUSD price action continuing to test ever higher along trend line support-turned-resistance. As with several of the majors, Friday’s candle appears to be showing an Inverted Hammer. We will look for a down candle close to tomorrow, but refrain from an outright short given how high prices have reached overnight. A down close may produce a double Inverted Hammer, which would require further confirmation.
[B]AUD/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 AUDUSD, please visit the DailyFX Australian Dollar Currency Room.
[B]NZD/USD
Range trading continues [/B]
NZDUSD has settled in a comfortable range following an initial move higher from 0.7500, a level that corresponds to the bottom of a downward-sloping channel as well as a long-term bullish trend line that has held up NZDUSD since July of last year. With price action still quite far from threatening the overall bearish bias, current trading appears to be a period of consolidation within the broader down move.
Looking to this week, we find NZDUSD at the top of its current range below 0.7630. Should the current candle close as-is, it would produce a Hanging Man. We will look to short NZDUSD upon confirming this to be the case.
[B]NZD/USD Strategy[/B]
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Short NZDUSD near 0.7630 if current candle closes showing Hanging Man formation
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Set stop-loss above recent wick highs at 0.7673.
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Set target near the range bottom at 0.7531, risking 43 pips to gain 142.
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]