Last week our analysis yielded a net profit of 266 pips. Our Yen trade hit its profit target for a gain of 229 pips, while the Canadian dollar accelerated in our favor to the tune of 108 pips. Our short New Zealand dollar trade managed a modest 39 pips. A loss of 110 pips on our Pound position detracted from overall performance, but not detrimentally so. The start of this week sees a great deal of uncertainty among the majors following last week’s impressive offensive by US dollar bulls. Still, we see lucrative new opportunities in the Pound and the Canadian dollar with the other majors on the cusp of resolving their sentiments towards the greenback.
[B]EUR/USD
Ready to retrace losses?[/B]
Last week, Euro bulls lost momentum following a test above the psychologically significant 1.60 level, with EURUSD dropping sharply lower to break through the upward sloping trend line we have been following since February. We saw a decisive Three Black Crows pattern and changed our bias to bearish. To improve risk-reward parameters, we were looking for a retrace to 1.5800 to enter short. The reversal never came – EURUSD continued lower and our trade was not triggered.
EURUSD now finds itself near 1.5400, a level that has acted as significant support/resistance level (see chart below). While this looks like a plausible place for a retracement, a lack of clear candlestick signals will keep us from risking a counter-trend trade. We will remain on the sidelines as future price action makes the picture clearer.
[B]EUR/USD Trading Strategy[/B]
We remain flat, waiting for confirmation. Updates will be posted throughout the week at the Candlestick forum.
For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.
[B]GBP/USD
Inching higher along trend line support[/B]
Last week, GBPUSD showed a Bullish Engulfing pattern at an upward-sloping support line prompting us to go long near 1.9760, a multiple support/resistance level. While price action has not broken the trend line we were looking at, a stray wick low tripped our stop order for a loss of 110 pips.
Looking at current price action, we see an Inverted Hammer candlestick suggesting a reversal higher. On balance, this is generally considered a weaker level signal and confirmation is required. Should tomorrow’s candle validate a bullish bias, we will look to go long above trend line support targeting recent highs. Importantly, it must be noted that our intended profit target and stop loss levels require an entry near trend line support at 1.9690 for risk-reward considerations.
[B]
GBP/USD Strategy[/B]
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Long GBPUSD above 1.9690 on confirmation of a bullish reversal following the Inverted Hammer.
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Set stop-loss near 1.9588 below recent wick lows.
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Set profit target near 1.9954, risking 102 pips to gain 264.
For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.
[B]USD/JPY
Yen rally finds significant resistance[/B]
We originally advocated buying USDJPY two weeks ago on a retrace from 103.69 to 102.90, citing a confirmed Hammer candlestick. Last week, the pair rallied to close at 104.41 showing a Three White Soldiers candlestick formation, so we opted to continue holding long to a target of 105.19. This target was hit, yielding a total of 229 pips in profit.
Looking ahead, USDJPY price action has reached a significant level of resistance at 105.65. This marked a bottom that contained selling pressure for nearly a month between mid-January and mid-February. It is plausible to suspect a retracement here, with trend line support near 104.00 being the next buying opportunity. However, the lack of a specific candlestick signal will keep us on the sidelines for the moment until further confirmation is available.
[B]USD/JPY Strategy[/B]
We remain flat, waiting for confirmation. Updates will be posted throughout the week at the Candlestick forum.
For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.
[B]USD/CAD[/B]
[B]Eyeing return to trend line support[/B]
Last week, we suggested going long USDCAD upon a confirmed close above the trend line established at the 11/07/07 low. This proved wise as the pair proceeded to rally from our entry price at 1.0080 to close out the week at 1.0188, yielding 108 pips in profit.
Looking ahead, USDCAD is showing a large Doji candlestick following a Long White Candle. Considering the proximity of triple top resistance at 1.0250 above current price action, we reckon there is a good chance the pair will retrace lower to trend line support before resuming upward momentum, at which point we will re-enter long.
[B]USD/CAD Strategy[/B]
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Long USDCAD near trend line support at 1.0100.
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Set stop-loss at 1.0031 below recent wick lows
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Target a return to test 1.0250, risking 69 pips to gain 150.
For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.
[B]AUD/USD[/B]
[B]New support contains downside[/B]
Last week we opted to remain flat on AUDUSD. Having been rejected at the second test of 0.9500 and put in a double top, we expected the pair to decline and waited for a new buying opportunity at trend line support. Downside momentum did not extend as far as we had foreseen as AUDUSD cemented support above the 0.9285 level and proceeded to range above it for most of the week.
Erratic long candles in opposite directions make sense given last week’s US fundamental data overload, and we expect AUDUSD to begin taking up direction again shortly. That said, current price action finds itself near the midpoint between support and resistance, offering poor risk-reward parameters. Our bias remains bullish, and the next trade decision is a matter of selecting the best entry point to express that view.
[B]AUD/USD Strategy[/B]
We remain flat, waiting for an entry point. Updates will be posted throughout the week at the Candlestick forum.
For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.
[B]NZD/USD[/B]
[B]Trend Line Broken, Further Downside Looms[/B]
Last week, we decided to short NZDUSD below 0.7850 after the pair decisively broke through significant support marked by an upward-sloping trend line established in August of last year. Though the pair collapsed as low as 0.7724 throughout the week, our price target at 0.7604 proved too ambitious and was not reached. The week closed at 0.7811, yielding modest profits of 39 pips.
With price action nearly back to our original entry point, we continue to hold a bearish bias. That said, the current candlestick arrangement looks like a fledgling Three Inside Up pattern, a strong bullish reversal signal. If the current candle were to close above Thursday’s open, the pattern would be confirmed. If this is the case, NZDUSD will likely retrace toward 0.7950 to test trend line support-turned-resistance before the bearish trend resumes. Alternatively, the pair could resume dropping lower without retracement from current levels below 0.7850. The closing of the current candle will offer critical confirmation on the short-term outlook for NZDUSD.
[B]NZD/USD Strategy[/B]
We remain flat, waiting for confirmation. Updates will be posted throughout the week at the Candlestick forum.
For more resources on the NZDUSD, please visit the DailyFX New Zealand Dollar Currency Room.
[B]NOTE: [/B]Unless otherwise specified, all trades are closed at the end of the trading week.
[I]To reach Ilya regarding this or other articles he has authored, please email him at <[email protected]>.[/I]