Major Currencies Advance Against US Dollar - Where to From Here?

The US Dollar’s rebound was cut short as risk appetite surged on seemingly promising news from the G20 summit in London, weighing down the safe-haven asset du jour. Still, the greenback’s broad trajectory continues to look bullish with the current selloff being a correction in the context of a larger uptrend.

[B]EUR/USD

Strategy: Short at 1.5510, Targeting 1.2456

Weekly Profit / Loss: -10 pips[/B]

We first sold EURUSD at 1.5510. The pair’s net positioning is effectively unchanged from last week: prices dropped lower out of consolidation in a familiar congestion region above 1.34 to find support near 1.31, a level that has acted as both support and resistance in recent months, with the subsequent rebound taking prices back above 1.34. The trend remains convincingly bearish, with resistance reinforced by a falling trend line connecting major highs since August of last year (now at 1.3908). We maintain that the US Dollar trend remains broadly bullish and will remain short, watching for signs that the current upswing has run out of steam to add to the position.

For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.

[B]GBP/USD

Strategy: Short at 1.4450, Targeting 1.3731

Weekly Profit / Loss: -204 pips[/B]

Last week, we sold the British Pound at 1.4450 noting bearish next-day confirmation following a Dark Cloud Cover candlestick pattern just below resistance at a falling trend line established from the highs in mid-July 2008. As it stands, bearish momentum was cut short as the pair put in a Hammer following a re-test of trend line resistance-turned-support and reversed higher. Although the magnitude of the upswing looks ominous, prices have not taken out the previous swing high at 1.4783 or our stop-loss. Further, tomorrow’s US NFP report may crush risk appetite as traders are faced with the harsh reality of deep job losses and thereby continued sluggish spending in the world’s largest consumer market. We will remain short for the time being.

For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.

[B]USD/JPY

Strategy: Flat[/B]

Having bounced higher from support at a rising trend line that has guided the pair since mid-January, USDJPY is testing the boundaries of resistance in the familiar 99.11-99.73 congestion region. As we said last week, a break higher sets the stage for a major rally aiming in the vicinity of 110.00. Another rejection will send USDJPY back toward trend line support, currently at 95.24. We will remain flat for now as the pair yields additional confirmation.

For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.

[B]USD/CAD

Strategy: Long at 1.2188, Targeting above 1.30

Weekly Profit / Loss: +20 pips[/B]

We initially bought USDCAD 1.2188. Last week, the pair found support at a rising trend line established from the lows in November showing back-to-back Doji candles and suggesting a bounce higher was on the way. Indeed, the pair raced upward in the days ahead but bullish momentum was cut short by swelling risk appetite on the back of the seemingly encouraging G20 summit. We will remain long, looking for USDCAD to finally bypass resistance in the 1.2948-1.3018 area. That said, a daily close below current trend line support would amount to a substantial threat for near-term bulls and we may consider exiting the position as a precaution at that point.

For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.

[B]AUD/USD

Strategy: Flat[/B]

The Australian Dollar has outperformed nearly every major currency against its US counterpart through March. AUDUSD is now positioned ahead of key resistance below 0.7250 and hinting at the makings of a triple top. We will look for signs signaling that bullish momentum has been sapped and look to enter short in the days ahead, targeting the slightly upward-sloping trend line established from the lows in October.

For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.

[B]NZD/USD

Strategy: Flat[/B]

Last week we suggested that NZDUSD has been trading in a falling channel since mid-October. Turning back to the weekly chart, prices now look to be breaching resistance at the channel’s upper boundary, though a close it is necessary to confirm the breakout. Should this materialize, the subsequent rally will aim to challenge resistance in the 0.6435-0.6622 area.

For more resources on the NZDUSD, please visit the DailyFX New Zealand Dollar Currency Room.

[I]To contact Ilya regarding this or other articles, please email him at <[email protected]>[/I]