The week has opened with nearly all the majors positioned at pivotal technical levels, with the dollar eyeing a return to upside momentum. The Euro pairing is at the top of its recent range (with a near-mirror image in USDCHF), while that with the Yen, Australian and New Zealand dollars look to have completed anti-USD retracements and appear ready to move in the opposite direction. The most substantial dollar rally looks to be taking place against the greenback’s Canadian counterpart – the pair rallied decisively today and is likely to pick up steam. The Pound is alone in holding its own thus far, though the 2.00 level threatens the rally with a significant confluence of resistance.
Fibonacci Forum.
Strategy: Bearish below 1.5800, Targeting 1.5400
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. Price action sprang higher on a test of this and the 23.6% Fibonacci retracement of the 08/17/07-04/22 up move at 1.5398. EURUSD has now stalled ahead of the 1.58 level once again. A triple top appears to be forming here, with the next move favoring the downside. As we have noted on numerous occasions, we see the fundamental back-story as broadly bearish for the EURUSD (see article). With that in mind, we will keep our target modest for the time being but still expect a close below trend line support at 1.53 to yield a substantial selloff towards the 38.2% Fib at 1.5007.
For more resources on the EURUSD, please visit the DailyFX Euro Currency Room
Strategy: Flat, waiting for confirmation
Our analysis missed the mark last week as GBPUSD extended gains following a break above the downward-sloping channel that had guided price action since mid-March. We had been looking to the 23.6% Fibonacci retracement of the 11/09/07-01/22 decline at 1.9764 to contain the upside, but that too was broken to invalidate our bearish bias. Current positioning sees the pair on approach to test the 38.2% Fib level just above the psychologically significant 2.00 level. We will remain on the sidelines for the time being to see how GBPUSD reacts here to guide our thinking going forward. Mid-week updates are posted on the Fibonacci Forum.
For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.
Strategy: Bullish against 106.20, Targeting 108.20
Having spent over a week consolidating above the 61.8% Fibonacci retracement of the 12/27/07-03/17 decline at 107.35, USDJPY retraced to find support at an upward-sloping trend line that has guided price action since mid-March. A Long-Legged Doji candlestick in today’s price action gives initial indication that the decline is over from here with a bullish reversal. We will look for USDJPY to move higher to test the 61.8% level in the coming days on a run back above 108.00.
For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.
Strategy: Bullish against 1.0172, Targeting 1.0503
The Swiss Franc has remained range-bound against the US dollar since the beginning of May, oscillating between the 38.2% and the 61.8% Fibonacci retracements of the 02/21-03/17 decline. For the past two weeks, we have been looking for the pair to retrace lower for a long entry at the range bottom near 1.0200 to trade with the overall bullish bias for another run at the 61.8% retracement level. Prices have now reached support and appear ready for a reversal. We will retain our strategy as-is, looking for an oscillation higher towards the 1.05 level.
For more resources on the USDCHF, please visit the DailyFX Swiss Franc Currency Room.
Strategy: Bullish Against 1.0170, Target 103.50
Last week, we noted that Canadian price action appeared to be consolidating in a large Triangle formation. Resistance was overcome in the beginning of this month, 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. A sharp rally from support today saw the pair surpass the 61.8% Fibonacci retracement of the 08/16/07-11/07/07 decline at 1.0170, adding credence to our bullish bias. While our initial target will be 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.
Strategy: Bearish against 0.9600, Target TBD
We recently identified AUDUSD price action as having broken out of a Rising Wedge bearish chart formation following a dismal May unemployment report showing the economy failed to add 13.5k jobs as expected to shed -19.7k instead. Extending wedge support backwards corresponds to an upward-sloping line that has held up since August, adding all the more significance to its penetration. With our bias changed to bearish, we were looking for a pull-up to support-turned-resistance to yield a short entry point. Current positioning sees AUDUSD squarely below the trend line with a down Inverted Hammer candlestick to start the week. Resistance is reinforced by the 123.6% Fibonacci extension of the 02/29-03/20 decline at 0.9621. We will be looking for a return to downside momentum in the coming days.
For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.
Strategy: Bearish against 0.7623, Target 0.7500
Last week we suggested NZDUSD would head lower after showing a bearish Evening Star candlestick formation at the 23.6% Fibonacci retracement of 03/17-06/13 down move at 0.7623. Price action yielded some downside, but returned higher to end the week largely unchanged below the same resistance area. With little evidence to suspect a reversal of the downtrend, we will retain last week’s approach, looking for the pair extending lower to test the preceding low near the 0.75 level.
For more resources on the NZDUSD, please visit the DailyFX New Zealand Dollar Currency Room.
To contact Ilya regarding this or other articles he has authored, please email him at ispivak@dailyfx.com.
