The US Dollar looks set to resume upward momentum against the major currencies having spent the past week consolidating ahead of key resistance at swing high from November. The pairing with the Japanese Yen is a clear standout, with the greenback surging higher to assert itself as the go-to safe haven play amid today’s perilous financial markets.
EUR/USD
Strategy: Short at 1.5510 and 1.3364, Targeting below 1.2609
Weekly Profit / Loss: -105 pips
We first sold EURUSD at 1.5510 having identified a Long Black Candle that closed beyond trend line support. We then added to the position at 1.3364 on a break of support/resistance level above 1.34. Last week, the pair tested into the initial target area and corrected higher. We now notice EURUSD appears confined in a falling channel with prices bouncing lower having tested the upper boundary. We will continue holding short as price action works its way lower through the 1.2453-1.2609 area expecting substantial, long term downside.
For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.
GBP/USD
Strategy: Flat
As was the case last week, GBPUSD traded up for another test of resistance at a falling trend line connecting major swing highs from late October. The pair showed a Star candlestick hinting at a bearish reversal, but the magnitude of the confirmation bearish candle turned risk/reward against entering the position. We will continue to watch price action from the sidelines waiting for a viable opportunity to enter short.
For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.
USD/JPY
Strategy: Pending Long
We sold USDJPY as the pair broke below a triangle formation and the swing low from late October. Last week, we warned of potential trend change as prices rose to test the top of a bearish channel that has guided the pair lower since July. We wrote “it is feasible that after months of responding almost exclusively to trends in risk sentiment, the Yen is ready to yield to the fundamentals after Japan’s economy shrank the most since the 1970s in the fourth quarter.” Indeed, prices broke higher and we closed with a modest profit. USDJPY has now negated a potential double top at 0.9467 and advanced sharply higher. Unfortunately, the pair's momentum was so strong that the magnitude of the move skewed risk-reward considerations against taking a trade at current levels. We will remain on the sidelines for the time being but will be actively looking for opportunities to get long on a corrective downswing.
For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.
USD/CAD
Strategy: Long at 1.2188, Targeting above 1.2749
Weekly Profit / Loss: -53 pips
We bought USDCAD as the pair rallied to break past the upper boundary of a bearish channel. Positioning is largely unchanged since last week as the USDCAD continues to consolidate. However, we do note that prices have set up a Triangle formation, a continuation pattern that bolsters the validity of a bullish scenario. We will continue holding long, looking for USDCAD to surpass the recent swing high near 1.2750 for another test of the triple top at 1.30.
For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.
AUD/USD
Strategy: Short at 0.7079, Targeting 0.6072
Weekly Profit / Loss: -46 pips
We sold AUDUSD as the pair showed a Hanging Man with bearish confirmation. Positioning is little changed from last week as prices remain close to the 0.65 level, a standby support/resistance axis since late January. AUDUSD is now showing a Shooting Star below resistance, hinting that bearish momentum may be ready to resume in earnest. We will remain short targeting the swing lows near 0.60 and maintain a stop-loss at 0.7380 (above the 10/07/2008 wick high).
For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.
NZD/USD
Strategy: Pending Short
Last week we noted that NZDUSD was testing the top a bearish channel and looking to extend lower. Prudent risk management again advises against selling at current levels so we will remain flat for the time being. Indeed, the pair has sold off to meet support near the previous swing low at 0.5035 for a potential double bottom. Prices are now wedged between this and the top of the channel showing an Inverted Hammer and hinting at a breakdown. We will look for conclusive confirmation on the close of the current candle and position to enter short. Updates will be posted on 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]
