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US Dollar Consolidates, Short-Term Weakness Ahead (Candlestick Weekly)

Tuesday, 11 November 2008 09:45:45 GMT  |  Ilya Spivak, Currency Analyst

The US dollar has taken a step back against the major forex currencies: The Euro, Australian and New Zealand Dollars, and Canada all have broken above resistance and now consolidate ahead of a bullish push that promises short entry opportunities for long-term greenback bulls.

 

EUR/USD


Euro breaks higher, pauses to consolidate

We sold EURUSD at 1.5510 having identified a Long Black Candle that closed beyond trend line support. The pair is now trading at 1.2736 bringing our floating profit to around 2774 pips. Last week, we suggested Euro price action was setting up a Falling Wedge bullish reversal formation, with confirmation offered by positive divergence with the 14-day RSI oscillator. This was to yield a bullish correction to offer a new selling opportunity. Indeed, EURUSD broke above the Wedge top but has since turned range-bound. As it stands, we maintain that an upswing remains the likely next move from here. As this move gets underway in earnest, we will look for ebbing bullish momentum to add to our short exposure expecting the down trend to resume its course.


EUR/USD Strategy

1. Continue holding short EURUSD at 1.5510, looking to add.

2. Move stop loss to 1.4893.

3. Next “soft target” aims for a test below 1.2160.




For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.




GBP/USD


British Pound lags other majors, but bullish move remains likely

Broadly speaking, GBPUSD positioning is little changed from last week. Whereas EURUSD broke above its Falling Wedge, the Pound has seen its trading ranges contact as the pair is trapped between the wedge top and the late-October bottom near 1.5528. We continue to see divergence with the RSI oscillator, making the case that a bullish breakout is still in the cards. As such, we will remain on the sidelines for now, expecting said upswing to yield a selling opportunity in the coming weeks.


GBP/USD Strategy

Pending short. 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


Yen stalls ahead of key 100.00 level

Last week we found the Yen poised to test support-turned-resistance at 99.12 at a downward-sloping trend line connecting daily highs since late September. We placed our bets on a rebound in risky assets, implying weakness in the Yen that should send USDJPY higher. This view has been partially validated: USDJPY indeed broke above trend line resistance but significant upside failed to materialize, with prices settling in a range below the key 100.00 level. With no significant evidence to suggest otherwise, we will hold to last week’s strategy and remain on the sidelines as the pair yields confirmation of a directional bias.


USD/JPY Strategy

Flat. 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


Is Canadian Dollar strength ahead?

Last week, we noted that USDCAD reversed its recent rally following a test at 1.13, showing a Dark Cloud Cover candlestick formation and breaking lower to take out support trend line that had been in effect since late September. Prices have now settled in a familiar congestion region broadly defined in the 1.1472-1.1987 area. Potential now exists for a Head and Shoulders bearish reversal pattern with a neckline at the aforementioned range bottom. We will move from a bullish to a neutral bias at this point as let price action develop and yield indications of a directional preference.


USD/CAD Strategy

Flat. Updates will be posted throughout the week at the Candlestick forum. 



For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.




AUD/USD


Australian Dollar bullish leg underway

The past month has seen the Australian dollar oscillate lower in a downward sloping channel. Last week, we noted a steep divergence with the RSI oscillator, pointing to the conclusion that bearish momentum is losing steam. Indeed, we have seen AUDUSD break above the channel’s upper boundary and consolidate to establish a base from which to move higher. As such, we will retain last week’s approach, waiting for an upswing to yield selling opportunities to position for long-term US dollar strength.


AUD/USD Strategy

Pending Short. 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


New Zealand Dollar positioned for gains

New Zealand dollar positioning remains in line with that of its Australian counterpart. Last week, we pointed out that NZDUSD was trading in a downward-sloping channel tempered by the now-familiar positive divergence with the RSI oscillator. Here too, a breakout above the channel’s upper boundary has given way to consolidation (in this case above the 0.5776 level). We will continue to look for our preferred scenario to develop, aiming to position short once the pair corrects higher.


NZD/USD Strategy

Pending short. 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 ispivak@dailyfx.com

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