The majors have lost consensus on the fate of the US dollar. The Australian and New Zealand dollars remain weak, with the latter booking 125 pips in profits on last week’s short trade. The Canadian dollar too appears ready to give in to greenback strength. Meanwhile, trading in the Euro, Sterling and Swiss pairings has been choppy around key technical levels. The Yen looks to blaze its own path altogether as it prepares a rally against the dollar.
[B]
EUR/USD
Strategy: Bearish below 1.5645, Targeting 1.5417[/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 found EURUSD stalled ahead of the 1.58 level once again. While we expected a triple top, EURUSD actually broke 1.58 on a brief push higher only to lose momentum and collapse sharply back into the range. Price action has found support at the 23.6% Fibonacci retracement of the 02/07-04/22 rally at 1.5645. A break here would eye a decline to support at the intersection of the 38.2% retracement and the major bullish trend line. As we have noted on numerous occasions, we see the fundamental back-story as broadly bearish (see article). With that in mind, our long term expectation is for a close below trend line support to yield a substantial selloff to test the 1.50 level.
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 remained on the sidelines as GBPUSD moved higher to test resistance at the 2.00 level. The psychological barrier was reinforced by the 61.8% Fibonacci retracement of the 03/14-05/14 decline and upward momentum faltered. The subsequent downside took price action lower to find support above the 38.2% level at 1.9757. A breach of support would eye a test of the 1.56 mark, while a bounce higher would meet resistance near the 50% Fib at 1.9878. We will continue to remain on the sidelines for now as we wait for the pair’s next move to yield clues on directional bias going forward.
For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.
[B]USD/JPY
Strategy: Flat, waiting for confirmation[/B]
USDJPY has been guided higher by an upward-sloping trend line since mid-March. Last week, 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, now reinforced by the 61.8% retracement level at 107.37. The next move will be critical to trend bias going forward. Should USDJPY break higher, the pair will likely gather steam for a test at 110.00. Otherwise, a resumption of the downward trajectory could see the pair extend losses to the 38.2% level at 102.92. We will remain on the sidelines for the time being as the pair’s next move promises to yield more clarity.
For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.
[B]USD/CHF
Strategy: Bullish against 1.0172, Targeting 1.0437[/B]
Last week we suggested going long USDCHF, seeing the pair at the bottom of a range between the 38.2% and the 61.8% Fibonacci retracements of the 02/21-03/17 decline since the beginning of May. With positioning at the bottom of the range near 1.0170 we were aiming for an upswing to test the 1.05 level. Following a brief false breakout lower, USDCHF returned within the range and has yielded just over 100 pips at present. We now notice a slightly downward-sloping channel offering a bit of bearish tilt to overall positioning. To that effect, we will revise our target slightly lower to 1.0437 to the channel top and continue holding long.
For more resources on the USDCHF, please visit the DailyFX Swiss Franc Currency Room.
[B]USD/CAD
Strategy: Bullish Against 1.0129, Target 103.20[/B]
Last week, we noted that Canadian price action had overcome large Triangle 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. Positioning is largely unchanged since last week, with support currently found at the 38.2% Fibonacci retracement of the 05/29-06/10 rally at 1.0129. With little evidence to suggest otherwise, will retain our existing bias, looking for the pair to move higher once directional momentum gathers steam. We will revise our target slightly lower to 103.20 in line with wick highs since mid-March. While our initial target remains modest, we think the fundamental back-story (see article) is supportive of a protracted rally.
For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.
[B]AUD/USD
Strategy: Bearish against 0.9650, Target TBD[/B]
We recently identified AUDUSD as having broken an upward-sloping line that has held up since August when May’s Unemployment report showed the economy -19.7k jobs. We suggested entering short on a pull-up to support-turned-resistance. Last week, 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 a rapid selloff has not materialized, the pair has inched lower to come within close proximity of support at the 23.6% Fibonacci retracement of the 03/20-05/21 rally at 0.9490. We will continue holding short as we look for downside momentum to accelerate.
For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.
[B]NZD/USD
Strategy: Bearish below 0.7440, Target 0.7194[/B]
Two weeks ago, we suggested NZDUSD would head lower following a test of resistance at the 23.6% Fibonacci retracement of 03/17-06/13 down move at 0.7625. Last week saw the pair range bound with positioning largely unchanged since the original trade idea was issued. With little evidence to suspect a reversal of the downtrend, we opted to continue holding short looking for the pair to test the preceding low near the 0.75 level. Our profit target was reached tonight, yielding 125 pips in profit. Going forward, we continue to expect more NZDUSD downside as the pair descends to approach a major support level near 0.7440. We will look for a daily close below this level targeting a test below 0.72.
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]