The US Dollar has entered a period consolidation against the major currencies following the momentous rally started earlier this month. Current price action has oscillated along clearly defined Fibonacci retracement and extension markers, yielding high-probability levels to guide the development of the greenback’s reversal from historic weakness.
EUR/USD
Strategy: Bearish below 1.4943 (or 1.4574), Targeting 1.4298
We have been bearish EURUSD since the pair broke below support at a trend line intact since August 2007 (1.5540). Bearish momentum found a bottom at 1.4574, the 200% Fibonacci extension of the 06/13-07/15 up swing. Prices are now consolidating between this and the 150% extension at 1.4943. With the trend firmly bearish at this point, we will look for selling opportunities on either an oscillation to current range resistance or a daily close below support to target the 238.2% level at 1.4298.
For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.
GBP/USD
Strategy: Bearish below 1.8567 (or 1.8320), Targeting 1.8080
Recent weeks have seen Sterling sell off sharply to find support at 1.8567, the 176.4% Fibonacci extension of the 02/20-03/14 rally. After a brief period of consolidation, the pair showed a Bearish Engulfing candlestick formation and slipped to the 200% level at 1.8320. We will look for a pullback towards support turned resistance below the 176.4% mark or a daily close below support to sell, eyeing a break lower to target 1.8080 (223.6% extension).
For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.
USD/JPY
Strategy: Flat, waiting for confirmation
The rally from March lows below 96.00 has entered consolidation between the June top at 108.57 and the 138.2% Fibonacci extension of the 06/16-07/16 down leg. A continuation of the rally aims at 111.59, the 161.8% level. That said, we have also noticed that price action appears to be unfolding in a Rising Wedge formation. As we mentioned earlier this week, “[a] Rising Wedge formation is typically indicative of a reversal and is confirmed by negative divergence between the direction of price action and an oscillator. We can see that USDJPY was making new highs in August as the Slow Stochastic oscillator as pointing down, suggesting bullish momentum is running dry.” With this in mind, we will remain on the sidelines until USDJPY offers greater clarity.
For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.
USD/CHF
Strategy: Bullish above 1.0841 (or 1.1123), Targeting 1.1583
The US Dollar’s impressive rally has seen USDCHF break above 1.0841, the 61.8% Fibonacci retracement of the 12/27/07-03/17/08 decline. Prices have entered into consolidation between this and the 76.4% level at 1.1123. We will look to go long on a pullback to support or a daily close above resistance, targeting the 2008 top near 1.1580.
For more resources on the USDCHF, please visit the DailyFX Swiss Franc Currency Room.
USD/CAD
Strategy: Bullish above 1.0440, Targeting 1.0725
The US dollar rallied convincingly against its Canadian counterpart to break above the major range top at 1.0376. The rally found resistance at 1.0725 and corrected lower, with current price action seeing consolidation between the 23.6% and the 38.2% Fibonacci retracements of the 07/15-08/12 rally at 1.0550 and 1.0440, respectively. We will look to go long near current levels, targeting a break above resistance to challenge the last major top at 1.0725.
For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.
AUD/USD
Strategy: Bearish below 0.8513, Targeting 0.8192
Australian dollar price action has breached a major supporting trend line in place since March 2007, indicating the pair’s massive decline from multi-year highs last month is far from over. That said, current positioning just above the 61.8% Fibonacci retracement of the 08/20/07-07/15/08 rally at 0.8513 skews risk-reward considerations against an outright short. We will look for a daily close below support to sell AUDUSD, targeting the 76.4% level at 0.8192.
For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.
NZD/USD
Strategy: Bearish below 0.6808, Target 0.6468
The precipitous decline of the New Zealand dollar found support at a long-term trend line in place since September 2001. Prices then retraced to support-turned-resistance at the bottom of a channel that had contained the downtrend since mid-March and turned lower once again. Trend support is reinforced by the 61.8% Fibonacci retracement of the 06/28/06-02/27/08 rally at 0.6808. We will look for a daily close below this level to target the 76.4% level at 0.6468.
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].
