Last week saw the US Dollar mount a momentous offensive against the major currencies, breaking trend-setting support and resistance levels and reaching past even our most ambitious targets. Presently, we see the greenback rally stalling as the forex markets prepare for a corrective counter-move against the greenback. We see the US dollar entering a long-term period of appreciation, with Fibonacci retracement and extension levels lined up to point traders to the levels where the retracement will complete and the broad trend resume momentum.
EUR/USD
Strategy: Bearish below 1.5276, Targeting 1.4818
Last week we took a bearish outlook on EURUSD, expecting a break below support at a trend line intact since August 2007 (1.5540) to target the 23.6% retracement of the large 08/16/07-04/22/08 rally (1.5396). Price action did accelerate lower, though the speed and reach of the decline went substantially beyond our expectations. Current positioning sees EURUSD positioned at the 38.2% Fibonacci retracement of the 01/12/07-04/22/08 rally at 1.4814. We expect a corrective bounce here, taking the pair to the 23.6% level at 1.5276. With the trend bias firmly bearish, we will look to get short here as the dollar’s long-term reversal continues.
For more resources on the EURUSD, please visit the DailyFX Euro Currency Room..
GBP/USD
Strategy: Bearish below 1.9117, Targeting 1.8722
Last week, we suggested that downward momentum would take GBPUSD lower from the 61.8% Fibonacci retracement of the 05/14-07/15 rally support at 1.9667 to test multi-month support above 1.94. As with the Euro, the decline overshot our expectations. Sterling is now positioned at the 138.2% Fibonacci extension of the 02/20-03/13 rally at 1.8966. A retracement is likely to take the pair to the 123.6% level at 1.9117, with downward momentum resuming from there to target 1.8722.
For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.
USD/JPY
Strategy: Bullish above 108.26, Targeting 111.78
We have advocated a bullish scenario for USDJPY since the pair tested resistance-turned-support at a trend line marking the 06/22-03/17 downtrend in mid-July. Our long-term objective pointed to a rise from 105.14 to break above resistance at 107.39, the 61.8% Fibonacci retracement of the 12/27/07-03/17 decline, to target 110.00. The broad dollar rally took USDJPY past our target level to reach a high of 110.38. The pair is now retracing lower, with support seen at the 14.6% Fibonacci retracement of the 03/17-08/11 rally at 108.26. We will look to re-enter long from there, looking for a run to 111.78.
For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.
USD/CHF
Strategy: Bullish above 1.0620, Targeting 1.1133
Last week suggested USDCHF would maintain bullish momentum following a break past resistance near at 1.0395, the 23.6% Fibonacci retracement of the 03/17-05/08 up swing. Our target at 1.0623 was easily surpassed, with USDCHF now positioned at 1.0850, the 38.2% retracement of the 12/28/07-03/17/08 decline. This level is reinforced by the upper boundary of a bullish channel that had guided USDCHF since March. We see the pair pulling back to the 50% level at 1.0620. We will get long here, targeting a breakout to the 23.6% level at 1.1133.
For more resources on the USDCHF, please visit the DailyFX Swiss Franc Currency Room.
USD/CAD
Strategy: Bullish above 1.0440, Targeting 1.0865
Last week, we noted that a breakout above 103.50 opened the door to a sustained USDCAD rally. Recalling our third-quarter fundamental outlook, we proposed an initial target at 1.05 but suggested a prolonged upside momentum that will take the pair substantially higher. Current positioning sees USDCAD positioned below the 1.07 level and showing a Bearish Engulfing reversal candlestick formation. We will look for a pullback to find support at 1.0440, the 38.2% retracement of the latest 07/22-08/12 up move. A long position form this level will target 1.0865, the 08/16/07 wick high.
For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.
AUD/USD
Strategy: Bearish below 0.8953, Targeting 0.8402
Last week, saw a selloff after RBA Governor Glenn Stevens announced the bank’s next move will be to cut interest rates. We indentified price action as just above support at 0.9164, looking for a close below this level and go short targeting the 03/20 wick low at 0.8952. Of all the majors, the Australian dollar decline has been one of the most momentous: the larger antipodean currency lost a whopping 12.8% in the past 4 weeks. Support has been found at 0.8618, the 138.2% Fibonacci extension of the 03/21-07/15 up swing. A correction higher will present another selling opportunity at 0.8953 targeting the 161.8% level at 0.8402.
For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.
NZD/USD
Strategy: Bearish below 0.7064, Target TBD
Last week we suggested entering short NZDUSD following a break past the lower boundary of the downward sloping channel that has guided the pair since mid-March on a close below 0.7241, the 61.8% Fibonacci retracement of the 08/17/07-02/27 rally. Our target at 0.7013 came and went as NZDUSD collapsed to trade above the 61.8% Fib of the large 06/30/06-02/27/08 ascent at 0.6804. Support is reinforced by a bullish trend line intact since September 2001. We will look to get short on a pull-up to the 50% level at 0.7064 targeting a long-term break below trend line support.
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].
