Dollar Domination Continues

Last week proved immensely fruitful as we hit our long US Dollar targets on trades against the Euro, Australian Dollar, and New Zealand Dollar, yielding a cumulative 587 pips. We see the greenback continue to exhibit strength going forward, with the majors now lined up to offer new entry opportunities.

[B]

EUR/USD

Strategy: Bearish below 1.5540, Targeting 1.5396[/B]

Last week we suggested EURUSD would move lower following a corrective pull-up to retest the 38.2% Fibonacci retracement of the 06/13-07/15 upswing at 1.5754. Price action validated this scenario as EURUSD dropped past our target at 1.5590 (yielding 190 pips) to rest above the long-term trend line that has help up the pair since August 2007. We remain bearish, expecting a break below trend line support to target the 23.6% retracement of the large 08/16/07-04/22/08 rally at 1.5396.

For more resources on the EURUSD, please visit the DailyFX Euro Currency Room

[B]GBP/USD

Strategy: Bearish below 1.9667, Targeting 1.9410[/B]

Last week, we saw GBPUSD retrace a bit higher as selling pressure met support above the 38.2% Fibonacci retracements of the 05/14-07/15 rally 1.9851. The level was reinforced by an upward-sloping trend line established in mid-June. Though we remained on the sidelines, we said our overall sentiment favored a bearish scenario, with a break past trend line support opening the door for substantial downside. Our assessment proved correct as GBPUSD sold off sharply to break trend line support and surpass the last layer of Fib support at 1.9667, the 61.8% Fib level. We expect downward momentum to continue, taking GBPUSD lower to test multi-month support above 1.94.

For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.

[B]USD/JPY

Strategy: Bullish above 108.60, Targeting 110.00[/B]

We have advocated a bullish scenario for USDJPY since the pair tested resistance-turned-support at a trend line marking the 06/22-03/17 downtrend in mid-July. Our long-term objective pointed to a rise from 105.14 to break above resistance at 107.39, the 61.8% Fibonacci retracement of the 12/27/07-03/17 decline, to target 110.00. The initial portion of this scenario has already been validated with USDJPY trading above the 61.8% level. Last week, we indentified multiple support/resistance level at 108.20 as the last hurdle before the run to 110.00. Current positioning sees USDJPY testing above this resistance having been trading sideways for over a week. We will look for confirmation in a daily close above recent wick highs at 108.60 to go long.

For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.

[B]USD/CHF

Strategy: Bullish above 1.0500, Targeting 1.0623[/B]

Last week we remained flat on USDCHF having found the pair stalling ahead of the 23.6% Fibonacci retracement of the 03/17-05/08 up swing. Resistance was reinforced by the upper boundary of a downward sloping channel that had guided USDCHF lower since May. However, we suggested that weak selling pressure favored a bullish bias, with the pair testing 1.05 should resistance be overcome. Our analysis proved spot on – USDCHF broke above resistance and is trying above the 1.05 level as of the writing of this article. We see the pair maintain bullish momentum going forward, with the next target at 1.0623, the 05/08 wick high.

For more resources on the USDCHF, please visit the DailyFX Swiss Franc Currency Room.

[B]USD/CAD

Strategy: Bullish above 103.50, Targeting 1.0500[/B]

Canadian dollar price action overcame large trend line resistance in the beginning of June, followed by a brief rally and retracement back to trend line resistance-turned-support. We suggested USDCAD would find support here, with the next bullish run aiming to test the January high at 103.50. Last week, we saw USDCAD within a whisker of the 102.50-103.50 resistance area that has capped USDCAD this year following a rally from the intersection the 23.6% Fibonacci retracement of the 11/07/07-12/14/07 up swing and trend line support. We suggested looking for final confirmation with a breakout above 103.50 to go long, expecting a sustained rally with an initial target at 1.05. Yesterday’s price action yielded the confirmation we were looking for, triggering a long position. We will look for upside momentum to test 1.05 first, but supportive fundamentals point to a prolonged rally that will take USDCAD substantially higher.

For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.

[B]AUD/USD

Strategy: Bearish below 0.9164, Targeting 0.8952[/B]

Last week, we suggested shorting AUDUSD on a break below 0.9507, the intersection of the 38.2% Fibonacci retracement of the 03/20-07/15 rally with a trend that had supported price action since late March. Price action behaved as forecast, breaking lower to hit our target at the 61.8% Fib level (0.9296) and yielding 211 pips. Today saw a massive selloff after RBA Governor Glenn Stevens announced the bank’s next move will be to cut interest rates. Price action hangs just above the 76.4% Fib level at 0.9164, making a new short position unattractive from a risk-reward perspective. We will look for AUDUSD to close below this level and re-enter, targeting the 03/20 wick low at 0.8952.

For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.

[B]NZD/USD

Strategy: Bearish below 0.7241, Targeting 0.7013[/B]

Last week we saw NZDUSD testing major support at 0.7427, the 50% retracement of the 08/17/07-02/27 rally. We suggested that a close below this level opens the door for further selloff to the 61.8% Fib. NZDUSD followed through as expected, moving lower to hit our target at 0.7245 and yielding 186 pips. Price action also broke past the lower boundary of the downward sloping channel that has guided the pair since mid-March. Looking ahead, we will re-enter short on a close below Fib support at 0.7241, looking for selling pressure to drive prices to the 76.4% retracement at 0.7013.

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]