The EURUSD’s advance seems insatiable. The pair has gathered speed since overtaking 1.5000 and officially breaking free from a four-month old period of congestion. We will keep with the dominant trend and maintain our long position until there is a retracement that threatens to break the euro’s bullish advance.
EUR/USD
Strategy: Bullish against 1.5300, Targeting 1.5970 The EURUSD’s advance seems insatiable. The pair has gathered speed since overtaking 1.5000 and officially breaking free from a four-month old period of congestion. We will keep with the dominant trend and maintain our long position until there is a retracement that threatens to break the euro’s bullish advance. Since our target has once again been achieved and surpassed, we have notched our upside objective up to the 161.8% extension of the 8/16 to 11/23 advance at 1.5970. And, since this target is so close to the next major milestone at 1.60, we can use either number interchangeably as an ultimate target. To protect our profitable position, we have also moved up our soft stop to 1.5300 where price congestion happens to fall in line with a 38.2% retracement of the 12/20 to 3/17 advance. Caution should be taken however in the near-term given the proximity of the heady FOMC rate decision event risk.
GBP/USD Strategy: Bullish against 1.5300, Targeting 1.5970
The EURUSD’s advance seems insatiable. The pair has gathered speed since overtaking 1.5000 and officially breaking free from a four-month old period of congestion. We will keep with the dominant trend and maintain our long position until there is a retracement that threatens to break the euro’s bullish advance. Since our target has once again been achieved and surpassed, we have notched our upside objective up to the 161.8% extension of the 8/16 to 11/23 advance at 1.5970. And, since this target is so close to the next major milestone at 1.60, we can use either number interchangeably as an ultimate target. To protect our profitable position, we have also moved up our soft stop to 1.5300 where price congestion happens to fall in line with a 38.2% retracement of the 12/20 to 3/17 advance. Caution should be taken however in the near-term given the proximity of the heady FOMC rate decision event risk.
USD/JPY
Strategy: Bearish against 103.60, Targeting 95.15
Our bearish outlook on USDJPY has served us well. The flight from risk and high yielders has accelerated the yen’s advance against the battered greenback. Last week’s target of 100 was easily surpassed in a momentous drop that was spurred last Friday. Given the new depths USDJPY is plunging, we need to rely once again on Fibonaccis for our target. Pulling the last major bear swing from 12/27 to 1/23, we can see that the 200% extension lies just above 95 – a notable level in itself. Our stop has been moved up, but modestly. A reversal and change in our outlook for the USDJPY will need to counter a lengthy trend. Therefore, we remain bearish against 103.60. Cautious traders should drop their stops down considerably.
USD/CHF
Strategy: Bearish against 1.0175, Targeting 0.9450
Dollar selling continues to depress USDCHF to record lows. Recently, the pair’s decent has been especially intense; which means finding reliable targets and stops is that much more difficult. As testament to the sharp advance of the Swiss franc, it is even becoming difficult to find targets below parity through Fibonacci extensions. However, the major 161.8% extension of the 3/10/2006 to 11/23/2007 is called up around 0.9450. This is a considerable distance from spot; but given recent volatility could easily be met within a few days time. Of greater importance is protecting a profitable short position with a trailing stop. We will not flip to a long-term bullish bias without a major reversal, but a more near-term stop is necessary nonetheless. We have moved our soft-stop up to 1.0175 as an immediate floor for our floating profit.
USD/CAD
Strategy: Flat, waiting for confirmed move below 0.9560 or the bull trend to retake 1.0200
The loonie continues to make its own rules. Momentum behind dollar selling dies out as quickly as it is born and trendlines and Fib retracements fall as if they weren’t even there. We remain flat on this pair, awaiting a substantive break that defines direction. To the downside, a move below the 50% retracement in the 11/07 to 1/22 advance would provide confidence in building momentum, but a drop below the 61.8% figure of that same rally at 0.9560 will be our ultimate entry. For continued development to the upside, we will wait for the recent swing high at 1.02 to fall before contemplating a long position.
AUD/USD
Strategy: Bullish against 0.9105, Targeting 1.0000
The Aussie dollar’s multi-decade high at 0.95 may be too strong a nearby resistance to be easily surpassed under normal market conditions. AUDUSD has retested its recent swing high and low, at 0.95 and 0.9125 respectively, suggesting the lethargy of range trading may be taking over price action. Regardless, our bias remains with the long-term rising trend, and the recent congestion extreme low will merely stand as a marker for our stop. A 38.2% Fib retracement of the 1/22 to 2/28 upswing stands as a barrier for price action and our bullish bias. Considering the Aussie’s tight correlation to risk trends, volatility can surge suddenly and therefore a tight stop and aggressive target will serve us well.
NZD/USD
Strategy: Bullish against 0.7800, Targeting 0.8200
Confidence in the kiwi’s advance has eroded along with the general appetite for high yield around the currency market. Putting in for a very notable double top at 0.8210, the NZDUSD’s upside momentum has clearly ebbed. Our bias stays with the long-term trend in looking for an eventual break to new post-float highs for the kiwi dollar; however, we must also keep our stop nearby so as not to give back too much profit on our bullish run. The 38.2% Fibonacci retracement of the 1/22 to 2/27 rally has stood up to a recent downswing, but unconvincingly. A soft-stop at the 50% retracement of the same upswing seems prudent.
To reach John and Ilya with questions or comments about this and other articles they have authored, please email at research@dailyfx.com.