The Euro has advanced considerably against the US Dollar since setting a swing bottom on 04/20, but technical positioning suggests a reversal may materialize in the days ahead with prices stalling at critical resistance. The British Pound and the New Zealand Dollar continue to look weak as well, opening selling opportunities against the greenback.
EUR/USD
Strategy: Pending Short
Last week we noted that EURUSD is setting up a Descending Triangle, a bearish continuation pattern. Writing in an update earlier this week, we saw the pair has risen to test upper boundary of this formation at the 1.37 level marked by a falling trend line that has capped EURUSD since mid-August. Prices have been stalling here for much of this week, with negative divergence on the RSI oscillator suggesting that the next move is likely to favor the downside. We will monitor the pair for a clear entry signal in the days ahead to enter short, initially targeting the previous swing bottom near 1.29 and beyond the double bottom above 1.2456.
For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.
GBP/USD
Strategy: Short at 1.5034, Targeting 1.4493 and 1.3731
Weekly Profit / Loss: -192 pips
Last week we sold GBPUSD at 1.5034 as the pair showed a clear Bearish Engulfing candlestick pattern at the top of a Rising Wedge chart formation. Although recent days have seen price action test above the risk cutoff level at 1.5297, the pair did not actually issue a daily close breaching this boundary and so the stop-loss was not activated. A Dark Cloud Cover setup has now emerged, and negative divergence with the RSI oscillator continues to bolster the downside scenario. We will remain short, initially targeting previous swing bottom near 1.45. A break beyond that will expose a return to test the double bottom at 1.3731.
For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.
USD/JPY
Strategy: Pending Short
Last week we noted that USDJPY was hinting at a Head and Shoulders top. Indeed, prices have completed the second shoulder of the formation and broke below the neckline marked by a rising trend line. The pair has found support at the bottom of downward-sloping channel setup from early April and looks poised for a corrective upswing in the days ahead to re-test support-turned-resistance at the neckline (now at 97.39). We will remain on the sidelines as this plays out, looking to get short as the retracement tops out.
For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.
USD/CAD
Strategy: Flat
Bearish USDCAD momentum found support at 1.1459, the 11/04/08 swing bottom. This juncture also corresponds to the lower boundary of a falling channel established form early March. Prices put in a Piercing reversal pattern and rebounded to stall at support-turned-resistance at 1.1754, January’s swing bottom. Risk-reward considerations do not warrant a position at current levels and we will remain the sidelines. That said, as we noted last week, we see the broad USDCAD trend as bullish.
For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.
AUD/USD
Strategy: Flat
Last week we noted that AUDUSD was testing resistance marked by the top of a rising channel that has contained price action since October. Although this hurdle has now been overcome, the bulls now face a considerably more formidable barrier at 0.7729, a level that has acted as both support and resistance over recent years. We will remain on the sidelines for the time being as the pair issues a conclusive break or gives indications of a bearish reversal in this area.
For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.
NZD/USD
Strategy: Short at 0.5924, Targeting 0.5529 and 0.4921
Weekly Profit / Loss: -1 pip
Last week, we wrote that the New Zealand Dollar could be setting up a Triple Top ahead of a return to downward momentum. Writing in an update earlier this week, we suggested that this scenario was indeed unfolding, with NZDUSD showing a decisive Bearish Engulfing candlestick pattern below resistance above the 0.60 level. Negative divergence on the RSI oscillator bolsters the likelihood of the downside scenario. Positioning is effectively unchanged at present and we will remain short, initially targeting the previous swing bottom at 0.5529. Notably, this will be a soft target, meaning we see this as the next important juncture for NZDUSD but will not place a hard take-profit order there expecting the downtrend to continue for substantially longer. A stop loss will be activated on a daily close above the 05/11 wick high at 0.6132. **
For more resources on the NZDUSD, please visit the DailyFX New Zealand Dollar Currency Room.
** Stop-loss orders are activated on a daily close breaching the specified price level.
To contact Ilya regarding this or other articles, please email him at ispivak@dailyfx.com
