US Dollar Down But Not Out Against Major Currencies

The US Dollar has taken some heavy losses over recent weeks, but technical positioning suggests the greenback has not dropped past the point of no return despite having set fresh year-to-date lows against most major currencies and may yet stage a comeback in the days ahead.

[B]EUR/USD[/B]

[B]Strategy: Pending Short[/B]

EURUSD has been hard at work refuting our double top scenario below the December 2008 peak, breaking to new yearly highs. That said, we are not prepared to abandon our bullish US Dollar bias quite yet. Prices have yet to take out the wick high at 1.4723, leaving a bit of room for a (slightly different) double top outcome to materialize. Further, technical positioning in the equities markets points to a reversal lower, which would boost the safety-linked greenback. We will remain on the sidelines for now and see how things play out in the coming days.

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

[B]GBP/USD[/B]

[B]Strategy: Pending Short[/B]

The bottom line for GBPUSD has been largely unchanged from what we identified after prices broke trend line support established from the lows in March, with the pair still mired in the 1.5960-1.6595 range that contained it from early May to late July. Prices are now squarely at the range top, with the upside further restricted by support-turned-resistance at the aforementioned trend line. Still, a clear reversal signal remains elusive and we will hold off on entering short for the time being.

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

[B]USD/JPY[/B]

[B]Strategy: Flat[/B]

The long-term USDJPY down trend that we previously pointed out remains intact. Turning to the near- to medium-term picture, we note that prices have taken out a rising trend line established from the lows in December 2008 and now stand ready to challenge the next layer of support in the 91.03 – 91.94 congestion region. A break lower may open the door for another run at the lows just above the 87.00 mark and would fit well into our bearish stock reversal scenario considering any major sell-off in equities is likely to boost the Yen as investors unwind carry trades. We remain flat for now but will be monitoring prices closely for major developments in the days ahead.

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

[B]USD/CAD[/B]

[B]Strategy: Flat[/B]

USDCAD positioning is essentially unchanged from what we identified in our previous report: prices are moving sideways above 1.0782, a resistance-turned-support level that has continuously proven to be significant over the past year. A break lower will target the lower boundary of a falling channel in place since March (now at 0.9814) while a rebound higher will aim to challenge the channel top (1.1125). There are no clear entry signals at present and we will remain on the sidelines.

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

[B]AUD/USD[/B]

[B]Strategy: Pending Short[/B]

[B]Weekly Profit / Loss: [/B][B]-279 pips[/B]

Our attempt at selling AUDUSD at 0.8281 last week did not work out: the pair reversed higher to activate our stop-loss on a daily close above 0.8524 to close book the position with a loss. Still, the outlines of the bearish setup we originally indentified remain unchanged: prices continue to show a Rising Wedge reversal pattern with negative divergence on the RSI oscillator. The next layer of resistance looks to be the Wedge top at 0.8908, but any downward reversal in equity markets may derail Australian Dollar bulls before that, weighing on the high-yielder along with other risky assets. For the time being we will monitor price action for new selling opportunities in the days ahead.

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

[B]NZD/USD[/B]

[B]Strategy: Pending Short[/B]

NZDUSD positioning remains largely unchanged from what we noted in our last report: the pair is showing a dramatic rising wedge bolstered by negative divergence on the RSI oscillator, with a bearish reversal to confirm a double top below the September 2008 swing high. We will look for a daily close below the wedge bottom (currently at 0.6812) to enter short.

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

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