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Last week saw the EURUSD retrace higher to test the 1.58 level. The pair then collapsed, stalling briefly above the 23.6% Fibonacci retracement of the 05/08-05/22 rally at 1.5692 before falling straight down to the 61.8% level at 1.5488. The pair has since entered consolidation between that and the 50% Fib level. We have now identified an upward slowing trend line connecting recent lows as well as a downward-sloping resistance level at the highs. All signs appear to point to EURUSD coiling up for continued consolidation in the coming days. We expect to see some short-term upside momentum, but maintain that the fundamental forces embedded in the pair favor an overall bias to the downside. To that end, we see any potential up move capping out near 1.57, with a subsequent break downward out of consolidation targeting below 1.53.

     Fibonacci Forum.





EUR/USD


Strategy: Bearish below 1.5700, Targeting 1.5287

Last week saw the EURUSD retrace higher to test the 1.58 level. The pair then collapsed, stalling briefly above the 23.6% Fibonacci retracement of the 05/08-05/22 rally at 1.5692 before falling straight down to the 61.8% level at 1.5488. The pair has since entered consolidation between that and the 50% Fib level. We have now identified an upward slowing trend line connecting recent lows as well as a downward-sloping resistance level at the highs. All signs appear to point to EURUSD coiling up for continued consolidation in the coming days. We expect to see some short-term upside momentum, but maintain that the fundamental forces embedded in the pair (see article) favor an overall bias to the downside. To that end, we see any potential up move capping out near 1.57, with a subsequent break downward out of consolidation targeting below 1.53.




For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.




GBP/USD


Strategy: Bearish below 1.9760, Targeting 1.9400

Last week we noted that price action has been confined to a downward-sloping channel since mid-March. With the pair then stalling at the lower boundary of this channel, we held to our bearish bias. We suggested a scenario wherein the GBPUSD pulls up to the 61.8% Fibonacci retracement of the 02/20-03/13 rally just below 1.9760. In an alternative scenario, we thought the pair may rally all the way to the channel top above1.98 before a run lower toward 1.9400. As it happened, a mix of the two actually materialized. GBPUSD rallied to topside resistance above 1.98 and stalled between this and the 61.8% Fib before gapping lower at the weekly open. Needless to say, our bias remains bearish as we look for GBPUSD to test 1.94.




For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.




USD/JPY


Strategy: Bullish against 102.90, Targeting 105.19

Previously, we saw USDJPY poised to test downside resistance at the 32.8% Fibonacci retracement of the 12/27/07-03/17 decline above 102.90. The preceding week, we had successfully gone long there with a target at 105.19, the 50% Fib level. Considering the bias as favoring the upside, we opted to go long at 102.90 again, targeting a return to 105.19. The approach yielded results once again, with USDJPY hitting our profit target only to pull back yet again. With consolidation looking to persist further, we will once again look to advance the same approach as before, buying USDJPY above 102.90 with an eye to the upside for another test at the 50% Fib level.




For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.




USD/CHF


Strategy: Flat, waiting for confirmation

Our previous analysis saw us looking at the 12/27/07-03/17 down leg. We noted prices were ranging as USDCHF digested the preceding rally between the 38.2% and 50% Fib levels (1.0390 and 1.0625, respectively). We opted to play the range with a buy at Fib support. This analysis missed the mark as USDCHF collapsed through Fib support to approach the 1.02 level. Looking now at the 03/17-05/08 up move, we see that last week’s bottom coincides with the 38.2% Fibonacci retracement at 1.0251. Prices tried higher briefly, with USDCHF rallying above 1.0390 only to collapse lower again. With choppy price action around the 23.6% retracement level, the picture looks rather clouded. We will stay on the sidelines for the moment as we wait for a pattern to present itself.




For more resources on the USDCHF, please visit the DailyFX Swiss Franc Currency Room.




USD/CAD


Strategy: Flat, waiting for confirmation

Canadian dollar price action has remained choppy in recent weeks. Following a breakout of the 6-week range between 1.0010 and 1.0300, the pair descended below parity with the US dollar. The move likely borrowed some momentum from the brief spike rally in crude oil as prices spiked to $135/barrel. Price action has since retraced, currently pushing up against resistance at the 38.2% Fibonacci retracement of the 04/01-05/21 decline at 1.0010. We do not see a clear directional bias here at the moment and will remain on the sidelines as future price action provides more clarity.




For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.




AUD/USD


Strategy: Bullish against 0.9287, Target TBA

Writing on May 12th about AUDUSD resistance at 0.9500, we noted that “the more often a resistance tested, the likelier it is to break down.” We suggested going long on another retracement to 0.9287, marked by the 61.8% of the 02/28-03/20 decline. This support was made even stronger by the upward-sloping trend line that has held since August of last year, making a bullish reversal here likely. Price action validated our assertions as AUDUSD dipped to trigger entry and then mounted a bullish run to take out resistance at 0.95. We further noted that with the pair trading at levels unseen since 1984, we must rely on Fibonacci extensions to guide our thinking. To that effect, we pointed to an initial target at the 123.6% level at 0.9625. We chose not make this a “hard” take profit order however as we didn’t want to cut short profits from a potentially momentous move. Rather, we opted to monitor prices carefully and let the market show signs of slowing momentum before closing out. As it happened, AUDUSD found resistance precisely at the level we identified and slipped into consolidation between it and the resistance-turned support at 0.95. We will continue to hold the trade, expecting the current pause to give way to renewed upward momentum in the coming weeks.




For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.




NZD/USD


Strategy: Bearish against 0.7940, Target TBA

We initially reckoned four weeks ago that NZDUSD would retrace losses to re-test trend line support-turned-resistance near 0.7940. We looked to enter short from there as the bearish trend resumes. The pair followed through as expected – a high wick tipped the trend line before NZDUSD collapsed lower. Last week, price action stalled above the 0.7612, the 38.2% Fibonacci retracement of the 08/17/07-02/27 rally. We noted to expect some consolidation here and opted to hold off from taking profit, thinking downside momentum would resume in short order. The Fib level proved to act as support as expected. We then pointed to a downward sloping channel guiding the bearish trend. We opted to hold the trade, as we expect NZDUSD to retrace to the channel above 0.78 prior to further decline. We further suggested that those traders that did not enter short with us initially initiate a sell position on a fresh test of the channel top. Our thinking was validated as NZDUSD rallied above 0.78 and stalled at channel resistance. The second half of our preferred scenario is set to begin here. We will continue to hold short, expected a decline to extend through the 38.2% Fib level at 0.7612 to test 0.7500.




For more resources on the NZDUSD, please visit the DailyFX New Zealand Dollar Currency Room.



To contact Ilya regarding this or other articles he has authored, please email him at ispivak@dailyfx.com.

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