daily technicals

Dollar Remains Primed for Breakout Against Euro, British Pound

Wednesday, 19 November 2008 13:49:56 GMT  |  David Rodriguez, Quantitative Analyst

The Euro remains in a tight wedge formation against the US Dollar, with Rangebound price action likely to culminate in breakouts through short-term currency trading. Given a previously bearish bias on the Euro/US Dollar pair, a downside break and further US Dollar strength seems the more likely outcome.

The Euro remains in a tight wedge formation against the US Dollar, with Rangebound price action likely to culminate in breakouts through short-term currency trading. Given a previously bearish bias on the Euro/US Dollar pair, a downside break and further US Dollar strength seems the more likely outcome. Near-term EUR/USD support comes in at previous spike lows of 1.2390, while the 61.8 percent Fibonacci retracement of the 1.3120-1.2390 move at 1.2835 presents the clearest hurdle to any further Euro gains.

The US Dollar/Japanese Yen pair remains in much the same situation as the Euro/US Dollar, as the USD/JPY remains within a progressively tightening wedge formation. Price previously held at the 61.8 percent Fibonacci retracement of the 100.50-94.50 move at 98.20, and said level represents important resistance against any further USD/JPY gains. In terms of support, USD/JPY congestion zones near 96.00 offer the next noteworthy price floor. Overall bearish momentum leaves our bias firmly to the downside.

 

The British Pound/US Dollar pair remains in much the same situation as the rest of its forex trading counterparts, trading within a progressively narrower range through recent price action. It serves to note that the GBP/USD is currently challenging clear resistance at its multi-week downtrend line, and a break higher would signal that a move towards next noteworthy resistance at 1.5500 is likely. Short-term support comes in at the psychologically significant 1.5000, and a breakdown would instead imply that a drive to new lows is the more likely outcome.

 

The US Dollar/Swiss Franc pair recently broke the top of its trendline resistance mark, and the pair is currently challenging the 161.8 percent Fibonacci extension of the 1.1750-1.1200 decline at 1.2080. Given that price remains in very clear overbought territory, it seems increasingly likely that we see noteworthy retracements. Noteworthy support for the USD/CHF comes in at previous resistance at the 1.1750 mark.

 

The overall US Dollar/Canadian Dollar uptrend remains intact, but we see that the USD/CAD continues to fail at the 61.8 percent Fibonacci retracement of the 1.3015-1.1460 move at 1.2415. Inability to break said line suggests that we may see short-term USD/CAD weakness, and subsequent support comes in at the pair’s upward trend channel at approximately 1.2250. A break above 1.2415 would signal that a move towards previous highs at 1.3015 is more likely.

 

The Australian Dollar/US Dollar currency pair remains in a wedge formation, and the next several days of price action will likely the next major AUD/USD move. The pair currently trades near its upward-sloping trendline, and a break below would eye a test of a makeshift triple-bottom at 0.6340. Otherwise, next noteworthy resistance comes in at the 61.8 percent Fibonacci retracement of the 0.7000-0.6340 move at 0.6740, and a break higher would likely challenge clear price ceilings at 0.7000.

 

Further consolidation in the New Zealand Dollar/US Dollar pair leaves little directional bias for upcoming trade, as the pair trades almost exactly at the middle of its recent price channel. Overall momentum favors further NZD/USD declines, but the lack of conviction in recent price action suggests that the pair may continue to consolidate until further notice. Noteworthy support for the NZD/USD comes in at previous lows of 0.5348, while resistance comes in at weekly highs of 0.5754.

 

Written by David Rodriguez, Quantitative Analyst for DailyFX.com

We always want to hear your feedback on DailyFX articles. Send e-mails to drodriguez@dailyfx.com .

 

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