Last week saw the US Dollar mount a momentous offensive against the major currencies, breaking trend-setting support and resistance levels and reaching past even our most ambitious targets. Presently, we see the greenback rally stalling as the forex markets prepare for a corrective counter-move against the greenback. We see the US dollar entering a long-term period of appreciation, with Fibonacci retracement and extension levels lined up to point traders to the juncture where the retracements will complete and the broad trend resume momentum.
[B]
EUR/USD
Strategy: Bearish below 1.5276, Targeting 1.4818[/B]
Last week we took a bearish outlook on EURUSD, expecting a break below support at a trend line intact since August 2007 (1.5540) to target the 23.6% retracement of the large 08/16/07-04/22/08 rally (1.5396). Price action did accelerate lower, though the speed and reach of the decline went substantially beyond our expectations. Current positioning sees EURUSD positioned at the 38.2% Fibonacci retracement of the 01/12/07-04/22/08 rally at 1.4814. We expect a corrective bounce here, taking the pair to the 23.6% level at 1.5276. With the trend bias firmly bearish, we will look to get short here as the dollar’s long-term reversal continues.
For more resources on the EURUSD, please visit the DailyFX Euro Currency Room…
[B]GBP/USD
Strategy: Bearish below 1.9117, Targeting 1.8722 [/B]
Last week, we suggested that downward momentum would take GBPUSD lower from the 61.8% Fibonacci retracement of the 05/14-07/15 rally support at 1.9667 to test multi-month support above 1.94. As with the Euro, the decline overshot our expectations. Sterling is now positioned at the 138.2% Fibonacci extension of the 02/20-03/13 rally at 1.8966. A retracement is likely to take the pair to the 123.6% level at 1.9117, with downward momentum resuming from there to target 1.8722.
For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.
[B]USD/JPY
Strategy: Bullish above 108.26, Targeting 111.78[/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 broad dollar rally took USDJPY past our target level to reach a high of 110.38. The pair is now retracing lower, with support seen at the 14.6% Fibonacci retracement of the 03/17-08/11 rally at 108.26. We will look to re-enter long from there, looking for a run to 111.78.
For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.
[B]USD/CHF
Strategy: Bullish above 1.0620, Targeting 1.1133[/B]
Last week suggested USDCHF would maintain bullish momentum following a break past resistance near at 1.0395, the 23.6% Fibonacci retracement of the 03/17-05/08 up swing. Our target at 1.0623 was easily surpassed, with USDCHF now positioned at 1.0850, the 38.2% retracement of the 12/28/07-03/17/08 decline. This level is reinforced by the upper boundary of a bullish channel that had guided USDCHF since March. We see the pair pulling back to the 50% level at 1.0620. We will get long here, targeting a breakout to the 23.6% level at 1.1133.
For more resources on the USDCHF, please visit the DailyFX Swiss Franc Currency Room.
[B]USD/CAD
Strategy: Bullish above 1.0440, Targeting 1.0865[/B]
Last week, we noted that a breakout above 103.50 opened the door to a sustained USDCAD rally. Recalling our third-quarter fundamental outlook, we proposed an initial target at 1.05 but suggested a prolonged upside momentum that will take the pair substantially higher. Current positioning sees USDCAD positioned below the 1.07 level and showing a Bearish Engulfing reversal candlestick formation. We will look for a pullback to find support at 1.0440, the 38.2% retracement of the latest 07/22-08/12 up move. A long position form this level will target 1.0865, the 08/16/07 wick high.
For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.
[B]AUD/USD
Strategy: Bearish below 0.8953, Targeting 0.8402[/B]
Last week, saw a selloff after RBA Governor Glenn Stevens announced the bank’s next move will be to cut interest rates. We indentified price action as just above support at 0.9164, looking for a close below this level and go short targeting the 03/20 wick low at 0.8952. Of all the majors, the Australian dollar decline has been one of the most momentous: the larger antipodean currency lost a whopping 12.8% in the past 4 weeks. Support has been found at 0.8618, the 138.2% Fibonacci extension of the 03/21-07/15 up swing. A correction higher will present another selling opportunity at 0.8953 targeting the 161.8% level at 0.8402.
For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.
[B]NZD/USD
Strategy: Bearish below 0.7064, Target TBD[/B]
Last week we suggested entering short NZDUSD following a break past the lower boundary of the downward sloping channel that has guided the pair since mid-March on a close below 0.7241, the 61.8% Fibonacci retracement of the 08/17/07-02/27 rally. Our target at 0.7013 came and went as NZDUSD collapsed to trade above the 61.8% Fib of the large 06/30/06-02/27/08 ascent at 0.6804. Support is reinforced by a bullish trend line intact since September 2001. We will look to get short on a pull-up to the 50% level at 0.7064 targeting a long-term break below trend line support.
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]