Last week’s pro-dollar bias proved very fruitful: the New Zealand Dollar short hit its target to yield 184 pips while our Euro and Canadian Dollar positions advanced substantially in the right direction, adding 166 and 145 pips to our equity, respectively. Looking ahead, we expect the aforementioned open trades to hit their targets in the near term all the while the other majors are positioned at key levels and ready to offer new trading opportunities.
EUR/USD
Decline underway
Last week we opted to continue holding an open short EURUSD position having sold the pair at 1.5863 targeting a pullback to the long-term bullish trend line. EURUSD closed the week at 1.5697, yielding 166 pips.
Looking ahead, we see EURUSD accelerate lower. While past price congestion below current levels does offer multiple layers of support, we see the decidedly feeble test above 1.60 as indicative that sellers retain the upper hand. The beginning of the week sees EURUSD showing back-to-back Hammer candlesticks, suggesting a bit of uncertainty following the initial downward breakout from a Rising Wedge formation that has characterized price action since the first test at 1.60 in late April. We will retain our short, though the upward slope of trend line support will have us move the target 60 pips higher to 1.5591. To retain the risk-reward parameters of the original position, we will move our stop-loss to 1.5979.
EUR/USD Strategy
1. Continue holding EURUSD short at 1.5863
2. Move stop-loss to 1.5979
3. Target the long-term trend line at 1.5591, risking 116 pips to gain 272
For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.
GBP/USD
Wedge formation favors downside
Last week, we saw GBPUSD testing below multiple support/resistance level at 1.9960. We identified a Rising Wedge chart formation, signaling bullish sentiment is losing steam and favoring a break to the downside. Despite the apparent bearish bias, we saw positioning as less than favorable from a risk-reward perspective and opted to remain on the sides.
Current positioning shows GBPUSD has broken below the aforementioned multiple support/resistance level and is resting at the Rising Wedge formation’s lower boundary. The long upper shadow on Friday’s candlestick suggests bullish momentum has little follow-though. We will wait for a downside break out of the Rising Wedge to initiate a short.
GBP/USD Strategy
We remain flat, waiting for confirmation. Updates will be posted throughout the week at the Candlestick forum.
For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.
USD/JPY
Long-term bias favors bulls
Last week, we decided to take a step back and re-evaluate the longer-term outlook for USDJPY. The weekly chart suggested a downward-sloping resistance line that guided prices since June 2007 was decidedly penetrated with a Long White Candle in mid-June of this year. Price action looks to have remained indecisive since then, consolidating above support near 105.70. Though we found the pair showing a Hammer at support, we saw this insufficient to go long: the pair produced a similar setup in the preceding weeks with no follow-through. We opted to remain on the sidelines as the pair offered more clarity.
Returning to the weekly chart, we see the pair yielded a bullish candle following the Hammer candlestick. While this adds more credence to the bullish scenario, we now also note significant resistance at 108.20. We will look for final confirmation by way of a daily close above this level to initiate a long position. Should this materialize, USDJPY is poised to extend higher for a test of the 110.00 level.
USD/JPY Strategy
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.
USD/CAD
Bullish target within sight
USDCAD had consolidated in a large Triangle formation for nearly a year. Resistance was overcome in the beginning of June, followed by a brief rally and retracement back to trend line resistance-turned-support. Last week, we identified a Morning Doji Star at the fulcrum of the Triangle formation, suggesting a bullish reversal is forthcoming. We suggested buying USDCAD in the 1.0025 – 1.0050 area targeting 1.0233 above recent wick highs. Following a pull-back to trigger entry, USDCAD produced a large Bullish Engulfing and proceeded to rally to end the week at 1.0195, yielding 145 pips.
Last week’s decidedly bullish momentum shows no signs of waning at the moment. We will continue holding the trade expecting to hit the target at 1.0233 in the near term.
USD/CAD Strategy
1. Continue holding Long USDCAD.
2. Retain stop-loss at 0.9961.
3. Retain target at 1.0233 above recent wick highs, risking 89 pips to gain 183.
For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.
AUD/USD
Bearish reversal imminent?
Last week, we noticed that AUDUSD appeared to be showing a Wedge formation establishing since late February. While the upward slope would normally favor the likelihood of a bearish reversal, it seemed last week saw AUDUSD break out to the topside and retrace to resistance-turned-support. We saw what looked poised to close as a Bullish Engulfing and decided to remain on the sidelines as confirmation presented itself. Within two days, the pair reversed course to show a Bearish Engulfing instead. We hesitated from taking a long position as the formation failed to close below Wedge resistance turned support. AUDUSD would collapse the following day. While this confirmed the Bearish Engulfing as valid, it also skewed risk-reward in the wrong direction and left us on hold.
Looking at current positioning, we propose an alternate drawing of the Rising Wedge, originating the formation from 03/13 rather than 02/28 as we did last week. This suggests AUDUSD has now fallen to Wedge support having tested the topside. We will look for a close below the formation’s lower boundary to initiate a short.
AUD/USD Strategy
We remain flat, waiting for confirmation. 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.
NZD/USD
Short trade hits target, yields profit
Last week’s trading saw NZDUSD start below the preceding range top at 0.7630, suggesting more downside is ahead following an initial reversal at the upper boundary of bearish channel that has guided the pair lower since mid-March. We suggested it would be prudent to enter short at market between 0.7600 - 0.7630 eyeing a return to test 0.7446. The pair validated our expectations, extending lower to hit the target and yield 184 pips.
Current positioning sees NZDUSD at a major support above 0.7383, threatening a triple bottom. Though our bearish bias remains unchanged, we will remain on the sidelines until price action definitively breaks past this level to re-enter short.
NZD/USD Strategy
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.
To contact Ilya regarding this or other articles he has authored, please email him at [email protected]
