daily technicals

Euro, British Pound, Australian Dollar may Rebound Against US Dollar

Friday, 21 November 2008 14:03:48 GMT  |  David Rodriguez, Quantitative Analyst

The Euro continues to trade within a progressively narrower wedge formation against the US Dollar, and the next several days of price action will likely dictate Euro/US Dollar direction for the next several weeks of EUR/USD trading. Already we see the EUR/USD attempting yet another break to the topside after holding support overnight, and such a breakout would likely target previously stiff resistance at the 61.8 percent Fibonacci retracement of 1.3120-1.2390 move at 1.2840. Otherwise, subsequent support comes in at a triple-bottom in the 1.2330-1.2422 range.

Our bearish bias accurately called for a retest of wedge formation lows, but continued failure to break lower suggests that the Euro may in fact post short-term gains against its US counterpart. 

The US Dollar/Japanese Yen has seemingly broken its wedge formation, and a dip below support at approximately 95.70 suggests that further short-term losses are likely. Next price floors come in at the important 61.8 percent Fibonacci retracement of the 90.90-100.50 move at 94.60, which likewise coincides with an intraday double-bottom from November 12. Previous trendline support has now become resistance, and the USD/JPY has shown difficulty climbing above 96.00. Our very short-term bearish bias remains intact as long as price remains below the pair’s falling trendline at approximately 97.00.

The British Pound/US Dollar currency pair has recently broken above trendline resistance, but the GBP has nonetheless failed to break above previous peaks near the 1.5080 mark. Continued failure at said mark would mean that further GBP/USD consolidation is likely, and the break above previous trendline resistance does not signal a new short-term uptrend is underway. Though it arguably seems unwise to call for range trading in such a volatile trading environment, the British Pound is likely to remain confined within its recent 1.4639-1.5090 trading channel.

The US Dollar/Swiss Franc continues to break through key resistance levels, and the pair trades at fresh 15-month highs through time of writing. Subsequent resistance now comes in at June, 2007 highs at 1.2340, and a break of said resistance mark would likely target 21-month highs near the 1.2470 mark. Yet it serves to note that the USD/CHF remains in increasingly oversold territory, and every further rally increases the likelihood of a short-term retracement. Subsequent support is difficult to measure due to the severity of the ascent, but overnight spike-lows at 1.2171 serve as the next logical price floor.  

The US Dollar/Canadian Dollar has been nothing short of incredible, and the pair’s recent break of the key 61.8 percent Fibonacci retracement of the 1.3010-1.1460 move at 1.2420 has opened up a retest of previous multi-year highs near the 1.30 mark. The USD/CAD has thus far failed to break the 1.3000 level, but overall upward momentum suggests that continued gains are likely. The pair currently trades near a solid price floor at 1.2740, but a break below would likely target a move back towards previous congestion levels at the 1.2550 mark.

The Australian Dollar/US Dollar pair recently broke down from its short-term wedge formation, but the pair has thus far been unable to make a clear challenge of support at 0.6000. Oscillators now remain in fairly oversold territory, but it serves to note that there exists a substantial divergence of price and MACD lows through recent trade. That is to say that the current lows in price have not coincided with fresh lows in the daily MACD or more traditional oscillators. This is a fairly bullish signal, as it suggests selling pressures have eased. Our bias subsequently eyes further retracement from recent lows, and we may have to wait for a renewed panic in AUD/USD selling for the pair to break multi-year lows at 0.6000.

Much as we wrote yesterday, 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 0.5186. Resistance comes in at weekly highs of 0.5754. Much like we see in the AUD/USD, there exists a fairly clear bullish divergence in fresh price lows and comparatively bullish oscillators.

 

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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