bio2

US Dollar Unchanged, Look for Short-Term Rallies

Friday, 26 December 2008 13:42:47 GMT  |  David Rodriguez, Quantitative Analyst

The Euro has remained within an especially tight trading range against the US Dollar through the holiday-shortened trading week, and there is little reason to change our bias on the pair. A substantial Euro/US Dollar rally came to an abrupt end at the pair’s 200-day Simple Moving Average and 61.8 percent Fibonacci retracement of 1.6040-1.2330 at 1.4620.

The Euro has remained within an especially tight trading range against the US Dollar through the holiday-shortened trading week, and there is little reason to change our bias on the pair. A substantial Euro/US Dollar rally came to an abrupt end at the pair’s 200-day Simple Moving Average and 61.8 percent Fibonacci retracement of 1.6040-1.2330 at 1.4620. Said level now marks fairly significant resistance, and we see scope for further Euro/US Dollar corrections (weakness) through the near term. Subsequent resistance can be found at the 50.0 percent Fibonacci retracement of the aforementioned bear wave at 1.4180.

The Japanese Yen has remained in a similarly tight range against the US Dollar, and we see little reason to shift our near-term bullish bias. The pair posted incredible losses before hitting the bottom of a multi-year trend channel, and we can reasonably expect further short-term corrections before resumption in its broader downtrend. Yet the USD/JPY will also have to contend with a falling short-term trendline near the 92.00 mark. A failure at said level would leave the pair contained within its downtrend, while a break would likely target a run towards previous resistance near 97.50.

The British Pound has remained almost exactly flat despite an unexpected jump in short-term volatility, leaving our bias unchanged. The pair has recently found support near a previous double-bottom near 1.4600, and a continued hold would open up further short-term rallies. Near-term resistance begins at the psychologically significant 1.5000 mark, while subsequent spike-highs near 1.5200 may likewise hold back further short-term strength.

The USD/CHF has remained almost exactly unchanged through recent trade, and we maintain that the US Dollar/Swiss Franc is likely to hold important Fibonacci support through the near future. “The 1.0670 mark represents the 61.8 percent Fibonacci retracement of the 1.2300-0.9640 move, and said level may continue to contain declines through price action in the coming weeks. The shorter-term picture is much more difficult to decipher, as the severity of recent USD/CHF moves leaves little in the way of significant resistance levels. Previous spike-highs just above 1.1300 represent the next level of clear resistance, and the USD/CHF could effectively remain within a range through the holiday-shortened week of trading.”

Our outlook for the USD/CAD has remained effectively unchanged as price has remained stable. “The US dollar has found a base against the Canadian Dollar at the 1.2000 mark, representing the confluence of the USD/CAD’s short-term rising trendline and the 38.2 percent Fibonacci retracement of the 1.0300-1.3020 move. Said level is likely to contain any short-term declines in the USD/CAD, while intraday spike-highs near 1.2400 represent subsequent support. A break below 1.2000 would negate our short-term bullish bias. “

Our Australian Dollar outlook remains unchanged on almost-exactly flat AUD/USD price action. “The Australian dollar has shown clear difficulty in clearing psychologically significant support at 0.7000 against the US Dollar, which likewise represents the 38.2 percent Fibonacci retracement of the 0.8520-0.6010 decline. Inability to clear said resistance mark would definitively suggest that likely short-term direction is to the downside—favoring Australian dollar weakness. Support can be found at the AUD/USD’s short-term rising trendline, which roughly comes in at 0.6800. A break lower signals that a move towards previous support in the 0.6500-0.6600 range is likely.”

The New Zealand dollar finds itself almost exactly at support of a minor rising short-term trendline, with a break lower to signal further declines are likely. The pair has thus far failed at the 50.0 percent Fibonacci retracement of 0.6960-0.5190 at 0.6070, and such a move keeps our short-term trading bias to the downside. A break of 0.5700 invites a move towards intraday congestion zones in the 0.5400-0.5500 range.

 

We always enjoy reading feedback from our viewers. Send emails to DRodriguez@fxcm.com.

 

 

Resources

• free demo account
• forex courses
• open an account
• forex stream
• free webinars