Last week saw the US dollar give back recent gains against the major currencies. Those retracements appear over or nearing completion, with the New Zealand dollar leading the pack in what is shaping to be a broad-based dollar rally. The Australian and Canadian dollars are suspended at turning-point technical levels and ready for decline, while Yen price action has contracted below the last major layer of resistance. The Euro and Swiss Franc both lag behind, though a lack of follow-though in last week’s anti-dollar moves suggests they too will fall in line in the near term.
[B]
EUR/USD[/B]
[B]Strategy: Bearish below 1.5300, Targeting 1.5007[/B]
Euro positioning is little changed since last week. We have kept to a bearish bias on the EURUSD since the pair’s feeble test at 1.60 and subsequent descent into a range between the 1.58 and 1.54 levels. Support is seen at an upward-sloping trend line that has held since August of last year. A Fib drawn along this move (08/17/07-04/22) identifies 1.5398 as the 23.6% retracement level and further reinforces a floor beneath current positioning. A test of this support produced a brief rally last week, but momentum evaporated at the 1.56 level and the pair fell back. As we have noted previously, currency pairs tend to exit a range in the same direction as they came into it, suggesting the current consolidation favors the downside. We will look for a close below trend line support to go short, initially targeting the 38.2% Fib at 1.5007.
For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.
[B]GBP/USD
Strategy: Bearish below 1.9720, Targeting 1.9400[/B]
Last week, GBPUSD lost downside momentum above 1.94 as the pair ran into a support level that has held up to four previous tests since January. The pair put in a bottom and pulled up higher towards the top of a downward channel in place since mid-March at 1.9720. We opted to retain our bearish bias, expecting this clustering of resistance to be a substantial hurdle for an up-side push. We suggested shorting the pair below 1.9720, risking an extension of bullish momentum to test below 1.9770 prior to another decline to challenge the 1.9400 level. A false break penetrated through this top but was stopped by the 23.6% Fibonacci retracement of the 11/09/07-01/22 decline at 1.9764. The subsequent down candle closed at 1.9652 and back inside the channel. We will continue to favor last week’s scenario, looking for GBPUSD to decline to 1.94 again.
For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.
[B]USD/JPY
Strategy: Bullish against 107.38, Targeting 110.00[/B]
Having pushed past the 50% Fibonacci retracement of the 12/27/07-03/17 decline that had contained the pair in a range through May, USDJPY surpassed the 61.8% level with little fanfare to stall ahead of daily pivot point resistance above 108.00. Last week, we suggested the likelihood of consolidation above the 61.8% Fib prior to another bullish swing aiming to test the 110.00 mark. This is precisely what seems to be developing at present. A similar setup at these identical levels was noted from 2/14-2/26 and was followed by a sharp downward breakout. With price action still firmly above trend line support, we maintain that the USDJPY bias remains bullish and will look for an upside breakout in the near term.
For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.
[B] USD/CHF
Strategy: Bullish against 1.0200, Targeting 1.0545[/B]
The Swiss Franc has remained range-bound against the US dollar since the beginning of May, oscillating between the 38.2% and the 61.8% Fibonacci retracements of the 02/13-03/17 decline. Positioning is virtually unchanged since last week, with USDCHF oscillating in the middle of the aforementioned boundaries. As we did last week, we will look for an entry at the range bottom near 1.0200 for a long position to trade with the overall bullish bias for another run at the 61.8% retracement level.
For more resources on the USDCHF, please visit the DailyFX Swiss Franc Currency Room.
[B]USD/CAD
Strategy: Bullish Against 1.0131, Target 103.50[/B]
Canadian dollar positioning is beginning to gain more clarity after a long multi-week spell of choppy, knee-jerk trading. Looking at the broader picture, we notice the pair appears to be consolidating in a large Triangle formation. Resistance was overcome in the beginning of this month, followed by a brief rally and retracement back to trend line resistance-turned-support. This level is reinforced by the 32.8% Fibonacci retracement of the 02/02/07-11/07/07 decline at 1.0131. We see USDCAD find support here, with the next bullish run aiming to test the January high at 103.50. While our initial target will be modest, we think the fundamental back-story (see article) is supportive of a protracted rally.
For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.
[B]AUD/USD
Strategy: Bearish against 0.9488, Target TBD[/B]
Last we identified AUDUSD price action as having broken out of a Rising Wedge bearish chart formation following a dismal May unemployment report showing the economy failed to add 13.5k jobs as expected to shed -19.7k instead. Extending wedge support backwards corresponds to an upward-sloping line that has held up since August, adding all the more significance to its penetration. With our bias changed to bearish, we were looking for a pull-up to support-turned-resistance to yield a short entry point. Current positioning sees AUDUSD squarely below the trend line with a down candle to start the week. Support is seen at the 23.6% Fibonacci retracement of the 03/21-05/21 rally at 0.9488. A close below this level would be indicative of a return to downside momentum.
For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.
[B]NZD/USD
Strategy: Bearish against 0.7614, Target 0.7425[/B]
Last week we found NZDUSD at 0.7500, the bottom of a downward-sloping channel that has guided price action since mid-March. The 50% Fibonacci retracement of the 08/17/07-02/27 rally lay close beneath. We suggested the pair would retrace to test the 38.2% Fib level at 0.7614, with a re-emergence of the downtrend soon to follow. Price action validated our assessment – the rally tested resistance at the 38.2% level and turned lower showing a bearish Evening Star candlestick formation. We see the pair extending lower to test the 50% Fib level at 0.7425.
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]