Last week proved moderately fruitful, hitting our target on the Swiss Franc to yield 160 pips and advancing our New Zealand Dollar trade 96 pips in the right direction. This time around, choppy trading around oil prices and risk sentiment has made for substantial uncertainty in the major pairs. With the majority of significant US earnings reports over by Friday, this week may prove to be a defining moment in the dollar’s fate.
Fibonacci Forum.
EUR/USD
Strategy: Flat, waiting for confirmation
While we have kept a broadly bearish bias on EURUSD since the initial failure to close above 1.60 in late April, pinpointing a short entry point has proved difficult. Last week proved to be a rollercoaster, with Dollar price action seemingly driven entirely by the price of oil and the US earnings calendar for the Financials sector. An ill-fated rally took EURUSD higher from the 1.5906 level, setting a new high at 1.6036 only to collapse for a close within 4 pips of the open at 1.5910. Since then, price action has remained choppy around the 26.3% Fibonacci retracement of the 06/13-07/15 up swing. Current positioning suggests a Rising Wedge formation formed since the breakdown of the long-term bullish run at the initial 1.60 test. This pattern suggests that bullish momentum is contracting and favors a bearish reversal. We will remain flat for the time being as we wait for a downside break to validate this scenario. A move lower sees initial support at 1.5757, the 38.2% Fib retracement level.
For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.
GBP/USD
Strategy: Flat, waiting for confirmation
Last week, we wrote that “a break [above 1.9950] would eye the psychologically significant 2.00 level. Should this too be breached, GBPUSD will find itself testing above 2.01 in short order.” GBPUSD price action validated this analysis as the rally extended higher to tick at 2.0152 before settling in a range between the 14.6% and 23.6% Fibonacci retracements of the 06/13-07/15 rally at 2.0044 and 1.9977, respectively. Current positioning does not offer lucrative risk/reward parameters, so we will remain on the sidelines for now as we look for GBPUSD to break out of its current range and judge directional bias from there.
For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.
USD/JPY
Strategy: Bullish against 105.14, Targeting 107.37
The upward trend in USDJPY that has market price action since mid-March broke down to find support near the 50% Fibonacci retracement of the 12/27/07-03/17 descent at 105.14. Price action then retraced to the 61.8% retracement level at 107.37, where resistance proved substantial enough to send USDJPY back down. Last week, we suggested USDJPY would once again find support above the 105.00 mark, opting to go long here to capture another run to 107.37. Price action initially made a move beyond Fib support, spiking lower to 103.76 before reversing upward to reach a high within 23 pips of our target at 107.14. Upon closer examination, we see the down spike found support precisely at a trend line that marked the USDJPY 06/22-03/17 downtrend. This line was broken as resistance in early June, suggesting the broad picture may prove the current down swing as a correction in a larger long term rally. With this in mind, we retain our bullish bias on USDJPY and will continue to look for a break above the 61.8% Fib in the near term.
For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.
USD/CHF
Strategy: Flat, waiting for confirmation
Last week we suggested USDCHF would move higher from support at the lower boundary of a downward-sloping channel at 1.0080 to target 1.0240, the 38.2% Fibonacci retracement level of the 03/17-05/02 rally. Price action validated our analysis, booking 160 pips in profit. Price action has once again retreated lower below the 1.02 level and now eyes support at 1.0125, the 50% Fib level. Should this fall by the wayside as it did last week, the next level of support is again at the channel bottom, this time at 1.0060. We will remain flat and monitor prices for the time being, watching to see where prices find a bottom to enter long once again.
For more resources on the USDCHF, please visit the DailyFX Swiss Franc Currency Room.
USD/CAD
Strategy: Flat, waiting for confirmation
Canadian dollar price action overcame large trend line resistance in the beginning of June, 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. While substantial attempts higher have been made, a sustained rally failed to materialize and price action turned choppy. Last week the pair slipped lower below support at the 23.6% Fibonacci retracement of the 11/07/07-01/22 rally (1.0066) and settled at the aforementioned trend line once again. With USDCAD resting at parity, a dominant directional bias seems elusive once again. A break above trend line support would eye the 38.2% Fib at 0.9875 while a rally to close back above the 1.0066 level could open the door for prolonged upside momentum.
For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.
AUD/USD
Strategy: Bullish against 0.9702, Targeting 0.9831
We saw AUDUSD gap to open last week above resistance at 0.9702, the 138.2% Fibonacci extension of the 02/28-03/20 decline. We suggested the pair’s bias to be bullish from here, though we did not see substantial evidence to specify a profit target. AUDUSD would rally as high as 0.9849 the following day only to seesaw back to 0.97 the week’s end. With the pair still above relevant resistance-turned-support, our analysis is largely unchanged. We will view the 161.8% Fib at 0.9831 as the first rough target.
For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.
NZD/USD
Strategy: Bearish below 0.7704, Targeting 0.7446
Last week, we suggested NZDUSD was within close proximity of the upper boundary of a downward sloping channel that has guided price action since mid-March. We opted to short the pair below 0.7704, eyeing a return to support at 0.7446. NZDUSD has behaved as forecast, putting in a Hanging Man candlestick at the channel top and selling off to breach support at 0.7624, the 23.6% Fibonacci retracement of the 03/14-06/13 decline. We will continue to hold the trade, retaining the target at 0.7446.
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.
