The dollar rallied sharply against the majors last week, with more of the same likely going forward. The New Zealand dollar leads the pack, having moved 258 pips lower to validate our multi-week strategy. The greenback has also seen major breakouts against the Euro and Yen, with the other majors positioned at key support/resistance levels and likely to give ground.
[B]
EUR/USD
Strategy: Bearish below 1.5800, Targeting 1.5590[/B]
Last week we suggested EURUSD price action was showing a Rising Wedge formation formed since the breakdown of the long-term bullish run at the initial 1.60 test. Writing in a mid-week update, we changed our bias to bearish as the pair broke past support to stop at the 38.2% Fibonacci retracement of the 06/13-07/15 upswing. EURUSD has since declined further to the 50% level at 1.5669 and has reversed higher to re-test support-turned-resistance. We see current pull-up as corrective, with further downside momentum in the near to bring EURUSD to test long-term trend line support near 1.5590. A break here opens the door for a selloff to 1.53.
For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.
[B]GBP/USD
Strategy: Flat, waiting for confirmation[/B]
Last week, we saw GBPUSD price action ranging between the 14.6% and 23.6% Fibonacci retracements of the 06/13-07/15 rally at 2.0044 and 1.9977, respectively. Sterling would go on to break lower to find support above the 38.2% level at 1.9870. Current positioning sees the pair retrace a bit higher as Fib support is reinforced by an upward-sloping trend line established in mid-June. We will remain on the sidelines for the time, waiting for confirmation. That said, our overall sentiment cautiously favors a bearish scenario, with a break past trend line support opening the door for substantial downside.
For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.
[B]USD/JPY
Strategy: Bullish above 108.20, Targeting 110.00[/B]
We have advocated a bullish scenario for USDJPY as the pair tested resistance-turned-support at a trend line that marked the 06/22-03/17 downtrend. Our multi-week objective pointed to a rise from 105.14 to break above resistance at the 61.8% Fibonacci retracement of the 12/27/07-03/17 decline. Price action validated our outlook, with USDJPY rallying to surpass our target at 107.37, yielding 223 pips. Looking ahead, we see a multiple support/resistance level at 108.20 as the last hurdle before a run to 110.00.
For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.
[B]USD/CHF
Strategy: Flat, waiting for confirmation[/B]
Last week we remained flat on USDCHF having booked 160 pips in profit on a rise from 1.0080 to target 1.0240, the 38.2% Fibonacci retracement level of the 03/17-05/02 rally. The pair would rally strongly past resistance to pause ahead at the intersection of the 23.6% Fib and the upper boundary of a channel that has confined price action since May. USDCHF then issued two back-to-back Star candles, suggesting indecision. Most recently, a shallow pullback found support above 1.0335 the 07/08 close. The lack of selling follow-though will keep us from taking a short position here. Rather, we will remain on the sidelines as near-term trading offers more clarity. A break past 1.0379 opens the door for a rally to test the 1.05 level.
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. While substantial attempts higher have been made, a sustained rally failed to materialize and price action turned choppy. Last week, we saw USDCAD rally sharply higher from an intersection the 23.6% Fibonacci retracement of the 11/07/07-12/14/07 up swing and trend line support. The pair now stands within a whisker of the 102.50-103.50 resistance area that has capped USDCAD this year. We will look for the pair to offer final confirmation with a breakout above 103.50 and go long, expecting a sustained rally with an initial target at 1.05.
For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.
[B]AUD/USD
Strategy: Bearish below 0.9507, Targeting 0.9296[/B]
Our analysis missed the mark on AUDUSD last week. We suggested the pair would trade higher from 0.9702, the 138.2% Fibonacci extension of the 02/28-03/20 decline, to target the 161.8% Fib at 0.9831. Instead, the pair sold off as the dollar gained ground across the board to stall at a trend line established along the lows since 03/20. Support is reinforced by the 38.2% Fibonacci retracement of the 03/20-07/15 rally at 0.9507. We will look for a break below this level to enter short, targeting the 61.8% Fib at 0.9296.
For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.
[B]NZD/USD
Strategy: Bearish below 0.7431, Targeting 0.7245[/B]
Two weeks ago, we suggested NZDUSD was within close proximity of the upper boundary of a downward sloping channel that has guided price action since mid-March. We opted to short the pair below 0.7704, eyeing a return to 0.7446. NZDUSD behaved as forecast, selling off to breach support at 0.7624, the 23.6% Fibonacci retracement of the 03/14-06/13 decline. Last week, we opted continue to hold the trade, retaining the target at 0.7446. NZDUSD did not disappoint once again, hitting the target to yield 258 pips. Looking ahead, we see the pair testing major support at 0.7431, the 50% retracement of the 08/17/07-02/27 rally. A close below this level opens the door for further selloff to the 61.8% Fib at 0.7245.
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]