The unified trajectory around dollar weakness that had dominated trading in recent weeks continues to deteriorate, with the majors pulling even further in opposite directions. Euro price action has tightened just below the 1.5900 level, wedged between a triple top and a supporting trend line. Pound and Yen both look weak against the dollar. Meanwhile, the Australian and New Zealand Dollars, the Franc and the Canadian Dollar both look to further gains.
Fibonacci Forum.
EUR/USD
Strategy: Bullish above 1.5800, Targeting 1.6000
We noted last week that EURUSD is showing price action that is very reminiscent of February’s orderly ascent along the trend line, with consistent bullish days separated by shallow bearish Hammer candlesticks. The pair picked up a bit of volatility mid-week, putting in a triple top just below 1.5900. Though the G7 meeting briefly weighed EURUSD lower, the pair closed above trend line support to remain with the dominant up trend. As the pair coils up tighter, the proximity of a breakout nears. While the 1.5900 level is clearly strong, we feel there is a psychological need to reach 1.60 in the market before Euro sells off.
GBP/USD
Strategy: Bearish against 1.9750, Targeting 1.9360
Last week we identified a downward sloping resistance trend line guiding the GBPUSD lower, aiming at a decline to 1.9860. Our analysis proved correct – Pound sold off to penetrate support at the 61.8% Fibonacci retracement of the 01/30-02/20 down leg at 1.9725. Shortly after, the bears pared back allow a bounce back higher from the 50% retracement of at1.9658 to test resistance once again. Price action is now wedged between the 61.8% Fib and the downward sloping trend line. We continue to favor a bearish tone as the pair works through stacked support levels eyeing 1.9360.
USD/JPY
Strategy: Bullish against 100.70, Targeting 105.19
USDJPY failed to hold above the multi-year support level at 101.50, slipping lower below the 38.2% Fibonacci retracement of the 12/27/07-03/17 decline near 102.90 to find support at 100.70, a level marking the top of the range that contained USDJPY before the most recent push upward. Though 101.50 did not hold, downside momentum has been minimal and we do not see substantial evidence to change our bullish bias. Rather, it makes sense that such a major level (which is now turned from support to resistance having been broken in March) would not give way easily. We continue to look for USDJPY to move towards the 50% Fibonacci retracement above 105.
USD/CHF
Strategy: Bearish below 1.0100, Targeting 0.9840
Validating last week’s bearish bias, USDCHF has continued to grind lower below the 38.2% Fibonacci retracement of the 02/14-03/17 decline at 1.0196 eyeing the record-lowest close and the bottom of the recent range at 0.9840. Price action has been slow, and the pair is only about half of the way to our target. With no substantial evidence to change our stance, we remain bearish as the move plays out.
USD/CAD
Strategy: Bearish against 1.0250, Targeting 1.0120
Last week, we noted an upward-sloping trend line connecting recent lows offering support to USDCAD as it oscillated in the middle of the long-term 0.9793-1.0250 range (established in August of last year). USDCAD rallied from this area above the 61.8% retracement near 1.0120 to find itself in at the bottom of a familiar range, the very same one it had occupied since 03/20. We reckoned the pair would move higher form here to test the range top at 1.0250, which played out precisely as we suggested. With a rejection at the range top sending the pair lower to start this week, our bias flips to bearish as we look for a what will happen on a descent back to the 61.8% retracement level.
AUD/USD
Strategy: Bullish against 0.9220, Targeting 0.9500
The AUDUSD looks to have overextended itself somewhat last week, piercing through the 61.8% Fibonacci retracement of the 02/29-03/20 drop at 0.9287. The pair stalled here to end the week, with the weekend’s G7 communiqué sparking a dollar rally to push AUDUSD back lower. Australian dollar bulls have refused to give up easily, however, with the test at the 50% Fib bear 0.9220 sending the Aussie upward once again. AUDUSD now finds itself just below the 61.8% Fib, looking likely to ease lower to establish a base for further upside. This may see the pair turn at the 50% Fib, or extend lower to once again test trend line support. With the yield gap still firmly in the antipodean currency’s favor, we retain our long-term bullish bias.
NZD/USD
Strategy: Bullish against 0.7902, Targeting 0.8100
Last week we took a bullish view on NZDUSD on a break past the 38.2% retracement of the 01/22-02/27 advance near 0.7900. The pair rallied to test 0.8000 but failed to reach as high as our target at 0.8100. The weekend’s G7 meeting spooked risk appetite, bringing the pair lower and back to Fib support. With that event risk behind us, we expect upside to continue in earnest for a test at last week’s target at 0.8100.
To contact Ilya regarding this or other articles he has authored, please email him at ispivak@dailyfx.com.
