The US Dollar has lost about 5.6% against the top six of the world’s major currencies in the past 10 days and now looks nearly ready to begin strengthening again. The New Zealand dollar pairing is set to lead the others once again, with the Euro and Pound soon to follow.
[B]EUR/USD
Euro nears short entry zone[/B]
We sold EURUSD at 1.5510 having identified a Long Black Candle that closed beyond trend line support. The pair is now trading at 1.4789, bringing our floating profit to around 721 pips. Last week, we noted that Euro selling has stalled ahead of the psychologically significant 1.40 level showing a Dragonfly Doji candlestick, signaling a near-term bullish reversal. Indeed, the pair rallied decisively in recent days to come within a hair of testing the 1.49 level.
With our long term bias still firmly in favor of a bearish scenario, we see current upside momentum as a welcome opportunity to add to our short. We will look for the pair to find resistance in 1.49-1.50 area, filling in the gap left in early August before bearish momentum returns. We will move our stop back to 1.5142 above the 08/11 wick high in line with the new entry area. Short-term updates will be posted on the Candlestick forum.
[B]
EUR/USD Strategy[/B]
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Continue holding short EURUSD at 1.5510, look to add between 1.49-1.50. -
Move stop-loss to 1.5142, protecting 368 pips in profit.
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Next “soft target” aims for a return to 1.40.
For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.
[B]
GBP/USD
Bearish opportunity approaching
[/B]
Last week, we pointed to GBPUSD showing a Hammer candlestick followed by a convincing rally, suggesting a bullish correction has begun. Indeed, the pair has added nearly 7% to close above the pivotal 1.85 level.
Our bias has been bearish since the pair broke past major trend line support established from the lows in late 2002 on 8/11 (not shown). To that effect, we see the current pull-up as a selling opportunity. Initial resistance is seen near 1.88 at the highs of the Bearish Engulfing formation that set off the most recent leg of the downward move. We will look to see how price action reacts here to time our short entry. Short-term updates will be posted on the Candlestick forum.
[B]
GBP/USD Strategy[/B]
Pending short. 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
Yen positioning gains clarity[/B]
In recent weeks, we noted that USDJPY could diverge from US dollar strength seen in the other majors with the pair trading in a Rising Wedge formation confirmed by negative divergence with the Slow Stochastic oscillator. Indeed, USDJPY broke below wedge support even as the greenback scored gains across the remainder of the forex spectrum. Still, we opted to remain on the sidelines last week as the pair’s typical responsiveness to changes in risk sentiment added to uncertainty in light of recent financial market turmoil.
Current positioning is a bit cleaner, allowing us to get our bearings on USDJPY going forward. The break below Rising Wedge support points to a bearish bias. Near-term support has been found at 104.50, with resistance at a downward-sloping trend line near 108.00. The pair is now roughly in the middle between these two boundaries, making an entry unfavorable from a risk-reward perspective. We will look for a either a pull-up to resistance or a daily close past support to enter short with initial targets in the 102.70-103.00 range.
[B]USD/JPY Strategy[/B]
Pending short. 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
Support close in sight[/B]
We initially suggested that USDCAD had found resistance at a trend line in play since May 2004, a multi-month top dating from 06/15/07-08/31/07. Last week, we added that resistance was being reinforced by the upper boundary of a Rising Wedge formation originating in October 2007 and confirmed by negative divergence with the Slow Stochastic oscillator. The pair yielded an Inverted Hammer and proceeded to sell off, losing 4.68% in the past 10 days.
Current positioning sees USDCAD in close proximity to Wedge support. This is reinforced by the price congestion area between 1.0294 and 1.0225 containing the highs of the range that had characterized the pair before the bullish breakout. We will look for signs for a forming bottom here to position for a long entry. That said, we must keep in mind that a Rising Wedge is typically a reversal chart formation and a breakout to the downside is not out of the question.
[B]
USD/CAD Strategy[/B]
Flat. 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 correction nears completion
[/B]
Last week, we saw AUDUSD yield a bullish Hammer followed by a strong rally, suggesting a correction of recent weakness was underway. The move was not as clean as we had hoped: The Hammer was followed by several days of choppy trading that took AUDUSD initially lower before a notably imperfect Bullish Engulfing (not ideal in that the wick low of the bullish candle does not surpass the low of the bearish one) marked a return to bullish momentum.
Current positioning sees AUDUSD price action in close proximity to multiple support-turned-resistance at 0.8560. We will look for signs that the correction has found a top here to position for a short. A break above 0.8560 will open the door for a top to develop in the 0.8560-0.8840 price congestion area.
[B]
AUD/USD Strategy[/B]
Flat. 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
Leading return of US Dollar strength?
[/B]
Last week, we saw the New Zealand Dollar produce a Hammer candlestick with prices looking poised for a bullish reversal. Indeed, price action has advanced from the lows to stall ahead of support-turned-resistance near 0.6940.
Current positioning sees NZDUSD showing a Shooting Star candlestick formation suggesting a top may be forming. This is typically considered a weaker-level signal, and we will look for a bearish close on the current day’s candle as confirmation. Should this materialize, we will enter short in the 0.6885-0.6940 area targeting another test of the lows at 0.65.
[B]NZD/USD Strategy[/B]
Pending short. 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]