special reports

British Pound Consolidates, Euro Hints Double Top Against US Dollar

Friday, 09 October 2009 08:17:49 GMT  |  Ilya Spivak, Currency Analyst

The US Dollar has taken a hit this week, registering major losses against the Yen and the commodity currencies. Still, we remain short the British Pound against the greenback as prices consolidate in positive territory while our short Euro position looks to pick up momentum as prices hint at a forming double top.

EUR/USD

Strategy: Remain Short at 1.4710, Targeting 1.3742

Weekly Profit / Loss: -177 pips

We sold EURUSD at 1.4710 after the pair showed a Three Inside Down bearish reversal candlestick pattern. Prices have rebounded from support at a rising trend line support established from the swing lows in March but a new high has not been made and continued RSI divergence hints at a possible double top. We will remain short, looking for a break below trend line support (now at 1.4569) to open the door for a move to 1.3742 over the coming weeks. As before, a stop-loss activated on a daily close above 1.4847, the 9/23 wick high.






GBP/USD

Strategy: Remain Short at 1.6617, Targeting 1.5728

Weekly Profit / Loss: -127 pips

We sold GBPUSD at 1.6617 as prices put in an Evening Star on a re-test of support-turned-resistance at a rising trend line established from the swing lows in March. Positioning has been little changed for the past two weeks as the pair consolidates below 1.6125. We will remain short, revising our soft target slightly higher to 1.5767, the 09/28 wick low. A stop-loss remains at the break-even point (1.6617).






USD/JPY

Strategy: Flat

USDJPY has been trending lower in a steep downward-sloping channel since early August, with prices now on pace to test the major double bottom at 87.09. However, positive RSI divergence hints that the bears may not have enough momentum to break though this key juncture. Near-term resistance is seen at 89.55, the channel’s upper boundary, with a break above this level opening the door to a bullish correction towards support-turned-resistance at 92.09. We will remain on the sidelines for now, looking for an attractive entry opportunity to present itself.






USD/CAD

Strategy: Flat

USDCAD looks poised to break below major support at 1.0682 after testing the top of a falling channel that has confined prices since March. However, clear positive divergence on the RSI oscillator hints at weak conviction behind the down move, suggesting a bullish reversal may be ahead in the near to medium term. Should the breakdown materialize, the next level of support is seen at 1.0334.






AUD/USD

Strategy: Pending Short

The broad outlines of AUDUSD positioning have been unchanged for some weeks now, with prices confined to a Rising Wedge bearish reversal pattern showing negative RSI divergence as confirmation. Prices have now tested the wedge top but we do not have a clear reversal signal to initiate a short. We will remain on the sidelines for the time being.






NZD/USD

Strategy: Flat

NZDUSD is testing major resistance below 0.7444, a level that has been a significant barrier for price action since September 2007. Resistance is reinforced by the midline of a rising channel established from the lows in March that has contained upside momentum since early July. The weekly RSI oscillator is in overbought territory for the first time in over two years, suggesting a correction lower may be on the horizon. That said, we have no clear entry signal and will have to remain on the sidelines until better confirmation presents itself.




To reach Ilya regarding this article or subscribe to his email distribution list, please contact him at ispivak@dailyfx.com
 

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