Last week we saw the Euro return higher against the Dollar to test resistance at the 1.5800 level. We favored a bearish bias, looking for the pair to confirm a triple top here to go short eyeing a return recent lows near 1.54. Midweek, the pair showed an Advance Block bearish reversal pattern followed by a down candle, triggering entry at 1.5752. A busy Thursday calendar saw satisfactory NFP results and a very timid ECB, driving the pair lower to produce a large Bearish Engulfing pattern and yield 99 pips by week’s end.
[B]EUR/USD
Downside returns[/B]
Last week we saw EURUSD return higher to test resistance at the 1.5800 level. We favored a bearish bias, looking for the pair to confirm a triple top here to go short eyeing a return recent lows near 1.54. Midweek, the pair showed an Advance Block bearish reversal pattern followed by a down candle, triggering entry at 1.5752. The trade saw immediate loses as a false break past 1.58 took EURUSD higher. Fortunately, upside momentum faltered ahead of our stop-loss at 1.5945. A busy Thursday calendar saw satisfactory NFP results and a very timid ECB, driving the pair lower to produce a large Bearish Engulfing pattern and yield 99 pips by week’s end.
We will continue holding the position through this week, though we will adjust our target higher to reflect the new positioning of major trend line support now found at 1.5464. To avoid altering risk-reward to our detriment, we will move the stop-loss 1.5857, thereby maintaining the same ratio as our original scenario.
[B]EUR/USD Strategy[/B]
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Continue holding short EURUSD from 1.5752.
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Revise stop loss to 1.5857.
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Revise profit target to 1.5464, risking 105 pips to gain 288.
For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.
[B]GBP/USD
Rally fails ahead of 2.00 level[/B]
Two weeks ago, we saw GBPUSD push above the downward-sloping channel that has guided the pair since mid-March. The rally stalled just below a multiple support/resistance area at 1.9960 below the psychologically significant 2.00 level. Having seen substantial reversals here before, we decided to look for signs pointing to a shift back to downside momentum, targeting a pullback below 1.98. The initial bearish signal came 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.
Looking ahead, the pair’s positioning does not offer attractive risk/reward parameters. While our bias remains bearish, we will hold off from going short outright at current levels, opting to wait for a better entry point to present itself.
[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
Indecision at trend line resistance[/B]
USDJPY had been led higher by an upward-sloping trend line since mid-March. Last week, we noted uncertainty about the sustainability of the bullish bias prompted by an extended Evening Star candlestick formation just above support. However, we opted to hold off from taking a position as we waited for the pair to yield an optimal entry point.
A re-evaluation of the pair’s positioning this time around suggests the bullish trend line has been broken. Since then, price action has shown substantial indecision: we see two back-to-back Hammers, followed by an Inverted Hammer above a significant support/resistance area near 105.50. The most recent formation appears to be a Bullish Engulfing, though the close proximity of trend line support-turned-resistance hardly makes for attractive risk-reward parameters. We will remain on the sidelines for USDJPY to offer more clarity in the coming days.
[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
Prices remain choppy at key support[/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 turned choppy as the pair appears intent on forming a solid bottom before advancing higher. Last week teased us with a Hammer at support followed by Long White Candle that took price action out of our entry’s range. The next two days showed a Hanging Man and then a Long Black candle. This too appears to have been invalidated, leaving a murky picture once again.
Going forward, a lack of substantial change in technical positioning as well as the underlying fundamental forces (see article) suggest a bullish bias. We remain flat but continue to look for a substantive candlestick signal 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
Bearish momentum continues to gather[/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. As we suspected, price action retraced to trend line support-turned-resistance and has stalled there. Last week, resistance was compounded by the top boundary of the range that confined AUDUSD through the latter half of May and early June at 1.9628. The pair has not closed above this level in over 20 years, making it a very substantial hurdle. The confluence of upside barriers suggested the downside scenario remained our best bet and we suggested a short trade below 0.96 on a confirmed reversal pattern.
Midweek, our entry conditions were satisfied with an Inverted Hammer followed the next day by a bearish candle for a fill at 0.9549. As with EURUSD, price action immediately went against us with a Long White Candle. Price action then shifted to oscillating sideways for the remainder of the week. With our stop-loss safely untouched going into this week, we will opt to continue holding the position as we wait for bearish momentum to gather steam.
[B]AUD/USD Strategy[/B]
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Continue holding short AUDUSD from 0.9549.
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Retain stop-loss at 0.9683, above recent highs.
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Retain target above 0.9320.
For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.
[B]NZD/USD
Near term range retains bearish bias[/B]
Two weeks ago, we saw NZDUSD extend higher following a Morning Star formation at 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. We noted that price action was still quite far from threatening the overall bearish bias, suggesting the current upward momentum was a correction within the broader down move. Writing in a forum update, we noted that the rally had apparently lost steam with NZDUSD showing an Evening Star candlestick pattern. We suggested a short near 0.7576 with a stop-loss above recent wick highs at 0.7650 targeting 0.7428. The Evening Star was followed by some limited downside, though an all-out selloff did not materialize. Instead, NZDUSD price action settled into a range as the most recent fundamental releases had been digested with little new to stir directional momentum. Last week, a stray wick high took out our stop loss, booking 74 pips in loses.
Looking to this week, we see no substantial reason to alter our bearish bias. To that effect, we will look to re-enter the short trade near the top of the current range. That said, we do not see a definitive candlestick signal to confirm our thinking and will remain on the sidelines until such confirmation is apparent in the price action.
[B]NZD/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 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]