Writing last week as the Euro was trading near 1.5550, we noted that we expect the pair to “see some short-term upside momentum, but maintain that the fundamental forces imbedded in the pair (see article) favor an overall bias to the downside.” The pair did in fact test higher, but the 1.58 level capped the upside once again and EURUSD eased back to the 23.6% Fibonacci retracement of the 02/08-04/22 rally at 1.5645. While risk-reward considerations do not warrant an outright short at current levels, we will look for a pullback in the coming days to sell for a move lower to test 38.2% Fib support at 1.5417.
[B]
EUR/USD
Strategy: Bearish below 1.5800, Targeting 1.5417[/B]
Writing last week as the Euro was trading near 1.5550, we noted that we expect the pair to “see some short-term upside momentum, but maintain that the fundamental forces imbedded in the pair (see article) favor an overall bias to the downside.” The pair did in fact test higher, but the 1.58 level capped the upside once again and EURUSD eased back to the 23.6% Fibonacci retracement of the 02/08-04/22 rally at 1.5645. In identifying the significance of the 1.58 level, we now see that it corresponds to the 14.6% retracement of the aforementioned rally. The 14.6% ratio is derived by dividing any number in the Fibonacci series by the number four places down in the progression (the other ratios are derived in the same fashion – diving any number in the series by the next one down gives 61.8%, dividing by the number two places down gives 38.2%, and three places over gives 23.6%). While risk-reward considerations do not warrant an outright short at current levels, we will look for a pullback near the 14.6% level in the coming days to sell for a move lower to test 38.2% Fib support at 1.5417.
For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.
[B]GBP/USD
Strategy: Bearish below 1.9760, Targeting 1.9400[/B]
Recent weeks have seen us looking at a downward-sloping channel confining GBPUSD price action since mid-March. Last week, we found the pair broke lower past the 61.8% Fibonacci retracement of the 02/20-03/13 rally below 1.9760 following a test at channel resistance. We opted for a short, aiming see price action decline towards the 1.94 level. As it happened, GBPUSD reached as low at 1.9460, narrowly missing our target by 40 pips before a fundamentally-driven reversal higher fueled by the absence of a BOE interest rate cut and deterioration in the US unemployment rate. Price action has now returned to Fib resistance, with the channel top now found in the same area. With this confluence of key technical levels to cap the pair, we see a return to downside momentum. Our bearish bias remains intact as we view the current pull-up as a second-chance opportunity to get in short for a test at 1.94.
For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.
[B] USD/JPY
Strategy: Bullish against 105.19, Targeting 107.42[/B]
USDJPY traded sideways for nearly a month between the 32.8% and 50% Fibonacci retracements of the 12/27/07-03/17 decline found at 102.91 and 105.19, respectively. Last week, we saw the pair at Fib resistance and were looking to trade continued consolidation by buying USDJPY on a pullback to the 38.2% level. An insistence not to trade against the broad bullish trend (i.e. short from 105.19 to 102.90) proved to be prudent – USDJPY broke through resistance and now finds itself having closed above 106.00. We see a bullish trend line guiding price action higher as the up trend resumes, with the 61.8% Fib at 107.42 being the next level of significant resistance. We will look for a pullback to take USDJPY to resistance-turned-support above 105 and go long from there.
For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.
[B]USD/CHF
Strategy: Bullish against 1.0203, Targeting 1.0545[/B]
The Swiss Franc has remained range-bound in trading 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. We remained flat last week as the pair’s positioning in the middle of the range did not offer tempting risk-reward parameters. USDCHF has since declined to test the range’s lower boundary and bounced back. With the overall trend retaining a bullish bias, we will look to buy the pair above 1.0203, aiming for another test at the range top.
For more resources on the USDCHF, please visit the DailyFX Swiss Franc Currency Room.
[B]USD/CAD
Strategy: Bullish Against 1.0200, Target TBD
[/B]
Canadian dollar price action has remained choppy in recent weeks. Following a 6-week long attack against support at the 38.2% Fibonacci retracement of the 04/01-05/21 decline near 1.0010, Canadian dollar bulls pushed USDCAD below parity with the US dollar by the end of May. The move likely borrowed some momentum from the brief spike rally in crude oil as prices spiked to $135/barrel. Price action has since reversed sharply higher, rushing through multiple levels of Fib resistance to close above downward-sloping resistance line that had capped the upside since January. Interestingly enough, this has transpired all the while crude prices returned higher, reaching $138.54/barrel late last week. We now change our bias from neutral to bullish, looking to buy USDCAD above 1.02.
For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.
[B]AUD/USD
Strategy: Bullish against 0.9287, Target TBA[/B]
Writing on May 12th, we suggested going long AUDUSD on a pull-back to 0.9287, marked by the 61.8% Fibonacci of the 02/28-03/20 decline. Price action validated our assertions as AUDUSD dipped to trigger entry and then mounted a bullish run to take out resistance at 0.95. With the pair trading at levels unseen since 1984, we relied on Fibonacci extensions to target the 123.6% level at 0.9626. We chose not make this a “hard” take profit order however as we didn’t want to cut short profits from a potentially momentous move. AUDUSD found resistance precisely at 0.9626 and then slipped into consolidation between it and the resistance-turned support at 0.95. Most recent price action saw another run at this resistance rejected for a move lower to test at 0.95 again. This support is now made stronger by the presence of the bullish trend line that has guided AUDUSD higher since August of last year. We will continue to hold the trade, expecting renewed upward momentum in the coming weeks. For those traders still on the sidelines, current AUDUSD positioning offers a good pull-back opportunity to go long near 0.9500.
For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.
[B]NZD/USD
Strategy: Bearish against 0.7940, Target 0.7500[/B]
We have been holding NZDUSD short since a re-test of the trend line support-turned-resistance near 0.7940. The pair followed through as expected – a high wick tipped the trend line before NZDUSD collapsed lower. We further noted that the bearish trend was being guided lower by a downward-sloping channel. The beginning of last week saw the pair oscillate higher inside the channel to test the top again, this time at 0.78. We advised to continue holding for the bearish trend to resume from here. Specifically, we expected a decline to extend through the 38.2% Fibonacci retracement of the 08/17/07-02/27 rally at 0.7612 to test 0.7500. Our analysis was validated, helped along by a dovish RBNZ rate decision. Price action penetrated the aforementioned Fib support and is now poised to test the channel bottom near 0.75. We will set our profit target here, aiming to book 440 pips in profit from our original entry.
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]