Last week’s analysis proved profitable – GBPUSD hit our profit target to yield 197 pips, while EURUSD and AUDUSD offered weekly closes for combined profits of just under 250 pips. This more than offset being stopped out on USDJPY for a loss of 138 pips, upping our equity by a net profit over 300 pips. Currently, most of the majors are showing preliminary candlestick positioning in favor of the US dollar.
[B]EUR/USD[/B]
[B]Triple Top Contains Upside[/B]
At the beginning of last week we identified a Hammer at the trend line supporting EURUSD confirmed by a bullish candle. This led us to hold with our bullish bias, entering long at just above 1.5660 and targeting a test of the psychologically important 1.6000 mark. Though upside momentum materialized as we expected, our target was not reached. Price action stalled just below 1.5900, making a triple top. Still, with a close at 1.5826 the week yielded 166 pips in profit.
Looking ahead to this week, we see that the weekend’s G7 communiqué has buoyed the US dollar across all the majors. If the current EURUSD candle closes as-is, we will see a Bearish Engulfing and a break of the established bullish tend line. This would change our bias to favor the downside, and likely spark a major selloff in EURUSD. Should the candle close above the trend line, the bullish trend will remain intact and we will be looking for a buying opportunity. We are not able to make a reliable trading decision until today’s candle closes, and will wait for confirmation in tomorrow’s price action.
[B]EUR/USD Trading Strategy[/B]
We remain flat as we wait for confirmation
For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.
[B]GBP/USD[/B]
[B]Positioning for further downside[/B]
Last week, we noted a Shooting Star bearish reversal signal at the down-sloping resistance trend line. This shifted our bias to bearish on GBPUSD, looking for downside to 1.9730. Our analysis proved correct – GBPUSD declined to hit the target at 1.9730. Though profit/loss depends on where each trader entered the position, we opened short as of the printing of last week’s article at 1.9927 to book 197 pips in profit.
For this week, the pair does not show a clear candlestick signal as yet. Price action is currently testing 1.9690, a level that has acted as resistance in February and turned into support when price action penetrated above it. Our overall bias remains bearish. Should the close of today’s candle confirm a support break, we will look for continued downside targeting 1.9387.
[B]GBP/USD Strategy[/B]
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Short GBPUSD on a break of support at 1.9690
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Set stop-loss jus above the recent wick high at 1.9843.
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Set profit target near 1.9387, risking about 153 pips to gain 303.
For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.
[B]USD/JPY[/B]
[B]Finally ready for an upside push?[/B]
Last week opened with a candle that would become a Bullish Engulfing pattern by the close of Monday’s trading session. We noted that should this happen, we would buy USDJPY above 102.40 with a stop near 101.05, targeting 105.60. A spike wick low took out our stop, locking in loses of 138 pips. USDJPY would end the week just above support at 100.70, a level that acted as the range top for price action following the pair bouncing up from a multi-year low near 96.00.
The current candle looks to be forming an inverted Hammer. If the candle closes as-is, this will be a bullish reversal signal pointing to USDJPY upside momentum. If confirmed, we will go long USDJPY above 100.70, revising our profit target lower to aim just below 104.00.
[B]USD/JPY Strategy[/B]
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If the Inverted Hammer is confirmed, long USDJPY above 100.70
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Set stop-loss near 99.97 below recent wick lows.
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Set profit target just below 104.00, risking about 73 pips to gain 330.
For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.
[B]USD/CAD[/B]
[B]Large Range Top in Play Again[/B]
We took a cautionary stance on USDCAD last week having booked profits on a short trade from downward bounce following a test of the large range top at 1.0250. We established conditions whereby if the pair closed below the upward-sloping trend line guiding price action mid-range, we would go short again. Our conditions were not met, and no trade was triggered.
Currently, price action has retraced from the trend line back to the range top at 1.0250. There are no candlestick signals here yet. Given the pair’s previous behavior at this level, our bias remains short. We will wait for confirmation of a close below resistance on today’s candle. Should this materialize, we will look to go short again towards the bottom of the range.
[B]USD/CAD Strategy[/B]
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Short USDCAD on a daily close below range top support at 1.0250.
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Set stop-loss at 1.0384, above January’s false break wick high.
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Monitor price action on a retrace to the trend line at 1.0100. Should trading stall here, take profit. On a break past the trend line, hold short to target 0.9835 near the range bottom.
For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.
[B]AUD/USD[/B]
[B]Reversal Underway – Will Trend Line Offer Support Again?[/B]
Last week, favored a long position above 0.9200 targeting 0.9470. Though AUDUSD did not reach as high as we had hoped, the upside momentum we forecast materialized as expected. The week closed with the pair at 0.9288, booking just over 80 pips in profit.
Looking ahead, we see today’s price action forming a Large Black Candle ahead of the psychologically significant 0.9200 level. This is typically a strong bearish signal, though our reading of risk-reward does not offer a tempting-enough entry to go short. On a break of 0.9200 we will look for price action to take AUDUSD to the long-term supporting trend line just above 0.9100. We expect this support to hold and position Australian dollar bulls to regain momentum. Should we see a break at the trend line, AUDUSD may be in for substantial losses in the coming weeks.
[B]AUD/USD Strategy[/B]
We remain flat as we wait to establish directional bias.
For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.
[B]NZD/USD[/B]
[B]Testing Trend Line Support [/B]
Last week open did not yield sufficient evidence to initiate a position in NZDUSD. Mid-week, price action moved higher from trend line support as risk appetite returned to the market. Mid-week, price action formed a Hanging Man candlestick marking a reversal back to the downside.
This week, NZDUSD finds itself at the familiar upward-sloping trend line established in August of last year. Should downside be contained here, we expect New Zealand Dollar bulls to retake momentum and drive the pair upward to the March high at 0.8067. Alternatively, a break and close below the trend line would signal substantial NZDUSD losses in the coming weeks.
[B]
NZD/USD Strategy[/B]
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Long NZDUSD on a confirmed reversal at 0.7850 along the upward sloping trend line.
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Set stop loss at 0.7773, just under the wick low of the most recent trend line test.
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Set target at 0.8067 near the March top, risking 77 pips to gain 217.
For more resources on the NZDUSD, please visit the DailyFX New Zealand Dollar Currency Room.
[B]NOTE: [/B]Unless otherwise specified, all positions are closed out 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]>.
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