Last week saw the dollar sell off across the spectrum as an empty US calendar saw traders focused on stock market turmoil fueled by poor performance of government-backed mortgage lenders Fannie Mae and Freddie Mac. Reassuring comments from the US Federal Reserve and the Treasury department have stalled the down move by the beginning of this week. With most major pairs positioned at critical support/resistance levels, the dollar may be preparing a broad-based counterstrike. The Australian dollar is a notable exception, as an apparent breach of significant resistance favors further upside.
[B]EUR/USD[/B]
[B]Strategy: Flat, waiting for confirmation[/B]
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. Long-term support is seen at an upward-sloping trend line that has held since August of last year. Last week we saw EURUSD find support at the 23.6% Fibonacci retracement of the 02/07-04/22 rally at 1.5652. Following some brief consolidation, the pair bounced higher as an empty US calendar saw traders focused on stock market turmoil fueled by poor performance of government-backed mortgage lenders Fannie Mae and Freddie Mac. Reassuring comments from the US Fed and Treasury department have stalled the dollar selloff by the beginning of this week. Further, the forthcoming data docket looks to show continued deterioration in the Euro Zone, which could weigh heavily on the single currency. This week opened with a bearish Hanging Man candlestick, adding to downside momentum. Should last week’s spike prove purely impulsive, a sharp correction lower could penetrate support in short order to target the 38.2% Fib at 1.5417. We will remain flat for the moment, looking the close of the current trading session to offer confirmation. Updates will be posted on the Fibonacci forum.
For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.
[B] GBP/USD[/B]
[B]Strategy: Flat, waiting for confirmation[/B]
Last week GBPUSD moved higher as broad US dollar selling overtook the market amid worries about government-backed mortgage lenders Fannie Mae and Freddie Mac (see EURUSD section). The pair found support at 1.9680, the 61.8% Fibonacci retracement of the 05/27-06/13 down swing and reverted to recent highs below the 123.6% Fib extension at 1.9950. A break here would eye the psychologically significant 2.00 level. Should this too be breached, GBPUSD will find itself testing above 2.01 in short order. We will remain flat as we wait to see what happens at this critical resistance level and issue updates as things develop via the Fibonacci forum.
For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.
[B]USD/JPY[/B]
[B]Strategy: Bullish against 105.15, Targeting 107.42[/B]
USDJPY has been guided higher by an upward-sloping trend line since mid-March. Two weeks ago, a downside break penetrated this support to bottom near the 50% Fibonacci retracement of the 12/27/07-03/17 descent at 105.15. Price action then bounced higher to re-test trend line support-turned-resistance reinforced by the 61.8% retracement level at 107.42. The hurdle proved too great, and USDJPY collapsed lower. Trading now eyes a return to support at 105.19. This has proven to be a substantial level in recent months and we will look to go long here to capture a bounce back towards 107.42.
For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.
[B]USD/CHF[/B]
[B]Strategy: Bullish against 1.0100, Targeting 1.0240[/B]
Last week we suggested going long USDCHF with positioning at the bottom of the recent range near 1.0170. We also noticed a slightly downward-sloping channel offering a bit of bearish tilt to overall positioning. To that effect, we aimed for a target at 1.0437, the channel top. Though our overall directional bias proved correct, USDCHF failed to reach high enough to hit our target. Price action tagged a high at 1.0351 and proceeded to collapse lower amid broad the broad dollar selloff (see EURUSD section). The pair found support at 1.0125, the 50% Fibonacci retracement of the 03/17-05/02 rally. This is further reinforced by the channel bottom closely below at 1.0080. We will retain our bullish bias, this time opting for a more modest target at 1.0240, the 38.2% retracement level.
For more resources on the USDCHF, please visit the DailyFX Swiss Franc Currency Room.
[B]USD/CAD[/B]
[B]Strategy: Flat, waiting for confirmation[/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. While substantial attempts higher have been made, a sustained rally failed to materialize and price action turned choppy above support. Last week saw support waver at the 38.2% Fibonacci retracement of the 05/29-06/10 rally, with price action continuing to inch lower along the trend line. Most recent candles have seen attempts to the upside fully reversed to yield consecutive Inverted Hammer candlesticks. Should price continue lower in this fashion in the coming days, it will invariably test the 61.8% level at 1.0013. A break below this would open the door to substantial selling towards 0.98. We will monitor price action in the coming days to see how the pair reacts at this pivotal support and assess directional bias from there. Updates will be posted on the Fibonacci forum.
For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.
[B]
AUD/USD[/B]
[B]Strategy: Bullish against 0.9720, Target TBD[/B]
We maintained a bearish bias on AUDUSD since the pair broke an upward-sloping line that has held up price action since August. Our preferred strategy called for a short on a pull-up to resistance-turned support. Two weeks ago, the pair rallied to our desired entry point and showed an Inverted Hammer candlestick. With resistance reinforced by the May top near 0.9650, we opted for a short expecting a return to downside momentum. While some selling materialized last week, Australian dollar bulls regained the upper hand amid a broad dollar selloff (see EURUSD section). This week’s open saw a gap above the trend line with Monday’s price action wedged between this and the 123.6% Fibonacci extension of the 06/09-06/12 down swing at 0.9720. A close above this level for the current candle would suggest the start of the next leg of the already record-setting AUDUSD rally.
For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.
[B]
NZD/USD[/B]
[B]Strategy: Bearish below 0.7704, Target below 0.7440[/B]
Two weeks ago, a NZDUSD short below resistance at the 23.6% Fibonacci retracement of 03/14-06/13 down move reached its profit target at 0.75 to yield 125 pips. Last week, we suggested further downside potential, but opted to wait for the pair to overcome major support level near 0.7440 before re-entering the short trade. Price action did not meet our entry conditions as NZDUSD reversed higher to break the range top resistance at the 23.6% level. NZDUSD is now within close proximity of the upper boundary of a downward sloping channel that has guided price action since mid-March at 0.7704. The downtrend remains intact as long as prices remain above this level. We will look to short the pair here eyeing a return to support at 0.7440.
For more resources on the NZDUSD, please visit the DailyFX New Zealand Dollar Currency Room.
To contact Ilya regarding this or other articles he has authored, please email him at <[email protected]>.