The EURUSD has moved along a virtually vertical trajectory since breaking the triple top at around the 1.4870-1.4900 area. Anyone trying to pick a top on the buoyant pair has been painfully disappointed. That said, no rally is indefinite and a retracement will occur.
Today’s daily chart is shaping to form an Inverted Hammer after the pair’s attempted run above 1.5800 lost steam. A long rally can be expected to have an equally profound reversal. If the top below 1.5800 is confirmed with a bearish candle tomorrow, a short trade can yield over 500 pips in profit. On balance, the long-term outlook for EURUSD is definitively bullish, so a tight stop should be employed since we are trading counter-trend.
EUR/USD
Resistance Reached?
The EURUSD has moved along a virtually vertical trajectory since breaking the triple top at around the 1.4870-1.4900 area. Anyone trying to pick a top on the buoyant pair has been painfully disappointed. That said, no rally is indefinite and a retracement will occur.
Today’s daily chart is shaping to form an Inverted Hammer after the pair’s attempted run above 1.5800 lost steam. A long rally can be expected to have an equally profound reversal. If the top below 1.5800 is confirmed with a bearish candle tomorrow, a short trade can yield over 500 pips in profit. On balance, the long-term outlook for EURUSD is definitively bullish, so a tight stop should be employed since we are trading counter-trend.
EUR/USD Trading Strategy
1. If the Inverted Hammer formation is confirmed with a red candle, short EURUSD below 1.5860.
2. Set stop above the Hammer wick’s high at 15924.
3. Set profit target above 1.5320, giving an excellent risk-reward ratio (risking 64 pips to gain 540).
GBP/USD
Found support?
Having broken a significant resistance level at 1.9960, the GBPUSD mounted a bullish run back above the 2.00 level. The pair then ran into resistance at 2.0331, falling for three consecutive days to form the Three Black Crows formation.
The current pull-back now finds itself testing the upward sloping trend-line at 2.0040, with resistance-turned-support at 1.9960 firmly in place below that. Our immediate posture is to remain flat as the pair settles towards support with a medium-term bullish view from there.
GBP/USD Strategy
1. Long GBPUSD above 2.0040 following a confirmation with a bullish candle at support.
2. Rather than setting a limit order to take profit at a hard target, we will wait to see what happens when the pair tests resistance at 2.0331 and hold the trade open in the event of a breach.
3. Set stop-loss just below 1.9900 to limit risk should support at 1.9963 give in. This gives good risk-reward parameters, risking 150 or so pips to potentially gain 290.
USD/JPY
Freefall!
USDJPY broke below medium term support above 103.00 and the long-term support at 101.69. USDJPY has not breached this level since 1994. Previous tests occurred in 1999 and 2004.
The pair is now in a virtual freefall eyeing the all time low around 80. However, as we mentioned for the EURUSD above, no rally is indefinite and a retracement of current yen strength will occur. The current price action does not signal a retracement to be imminent, but a sell at current levels with the pair a bit over-extended to the downside seems aggressive.
Though the bias is decidedly to the downside, we will wait for a better entry point to present itself.
USD/JPY Strategy
We remain neutral on the USD/JPY at the moment. The pair’s current positioning does not yield a good entry point.
USD/CAD
Coiling up
Having regained some territory after the dramatic spike low to 0.9000, the USDCAD now looks poised to dive back down again. The pair is trading in a Flag continuation pattern, suggesting the bias remains to the downside. The candles for the past several weeks click close to support, suggesting a break is brewing.
While there is no confirmation at the moment, the bias seems to the downside. If this scenario materializes, we will be looking to short USDCAD on a weekly close below 0.9770, targeting the low at 0.9430.
USD/CAD Strategy
We remain flat as we wait for confirmation to enter short.
AUD/USD
Ready for another run?
The past two weeks have seen the AUDUSD test at all-time high at 0.9490, only to fall back sharply some 400 pips. The decline has now stalled a bit at the upward-sloping medium term support.
With a yield gap of 4.25%, our long term bias for the AUDUSD is bullish. Should the pair fail to close below the trend line at 0.9230, we will look for a bullish candle to signal a long entry. If that support gives way, the next hurdle is a multiple resistance-turned-support level at 0.9104.
We will wait for the current candle to close and monitor the next one to confirm a bottom is in place, then go long once an entry point presents itself. Our initial profit target will be the high at 0.9500. If the decline stops at the trend-line and the AUD rally resumes, our stop-loss will be below 0.9210. If the pair breaks past the trend line, we will look for an entry above 0.9104 with a stop-loss near 0.9010.
AUD/USD Strategy
Our bias is bullish, but we remain on the sidelines for the moment as an entry point presents itself.
NZD/USD
Walking the line
Having tested the high of 0.8200 again last week, the NZDUSD has taken a step back towards the trend-line support at 0.7940. This now closely coincides with multiple resistance-turned-support level near 0.7934 (see chart below).
With the long term trend still looking bullish, this retracement presents a buying opportunity above support aiming for a bounce to test 0.8200 once again.
On balance, the monthly chart suggests a long-term resistance level in place since 2003 coinciding with the 0.8200 level. The March candle currently looks to be flirting with a Doji or Spinning Top body, suggesting the possibility of a prolonged reversal. However, we must be cautious not to make assumptions before the candle closes and confirmation is in place. For the time being, our bias remains long NZDUSD.
NZD/USD Strategy
1. Buy NZDUSD above 0.7934 targeting the February high of 0.8200.
2. Place stop loss below the trend line near 0.7850, thereby risking about 70 pips to gain over 260.
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