Candlesticks

US Dollar Rally Continues, Yields Nearly 900 Pips

Wednesday, 21 January 2009 05:56:24 GMT  |  Ilya Spivak, Currency Analyst

Positioning in favor of the US Dollar continued to prove lucrative last week: floating short positions against the Euro and the Australian Dollar added to previous gains while new exposure selling the Canadian Dollar yielded over 450 pips. Our short USDJPY trade inched a meager 38 pips in the wrong direction on a weekly basis but remains in positive territory overall.

EUR/USD

Strategy: Short at 1.5510 and 1.3364, Targeting 1.2547

Weekly Profit / Loss: +271 pips

We first sold EURUSD at 1.5510 having identified a Long Black Candle that closed beyond trend line support. Last week, we added to the position at 1.3364 on a break of support/resistance level above 1.34. The pair has now fallen past the initial target at 1.3075 showing a large Bearish Engulfing below resistance at a trend line connecting major swing highs starting from 12/18/08. We will remain short as we look for the pair to test the second target at 1.2547 near the bottom of the range that contained the pair from 10/22/08 - 11/10/08. We will maintain a stop-loss on the added portion of the trade at 1.3508.

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




GBP/USD

Strategy: Flat

Last week, we opted to remain flat on the British Pound, seeing a bearish bias but noting that risk-reward was skewed against the trade. The pair has now dropped below support at the bottom of a Falling Wedge formation that contained prices since late October. Price action is now testing multi-year triple bottom support in the 1.3680-1.4050 area that has held up sterling since 1985. With risk-reward far from favorable, we remain flat as we wait to see what GBPUSD does at this pivotal juncture.

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




USD/JPY

Strategy: Short at 92.48, Targeting 84.25

Weekly Profit / Loss: -38 pips

We sold USDJPY as the pair broke below a triangle formation and the swing low from late October. Last week, we noted an Advance Block formation a key support / resistance level (93.17) and opted to remain short. The pair managed a brief upswing but is now showing an Evening Star pattern and looks ready to resume downward momentum. We will continue holding short, with the target still being 84.25 at the record-lowest monthly close from 04/1995.

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




USD/CAD

Strategy: Long at 1.2188, Targeting 1.2749

Weekly Profit / Loss: +453 pips

Last week, we opted to go long USDCAD in the 1.2177-1.2241 area as the pair rallied to break past the upper boundary of a bearish channel. The pair has since rallied sharply higher, reaching as high as 1.2702. With no substantive changes in the pair’s positioning, we will remain long eyeing December’s top at 1.2749 as an initial soft target. We will continue to maintain a stop-loss at 1.1939.



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




AUD/USD

Strategy: Short at 0.7079, Targeting 0.6397

Weekly Profit / Loss: +200 pips

Last week, we sold AUDUSD at 0.7079 as the pair showed a Hanging Man with bearish confirmation. Indeed, prices have extended considerably lower and are now close to our soft target near 0.64. With no substantive changes to positioning to threaten the downward bias, we will remain short and maintain a stop-loss at 0.7380 above the 10/07/2008 wick high.



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




NZD/USD

Strategy: Pending Short

Last week, we saw the New Zealand Dollar put in a Hanging Man candlestick and sell off to multiple support/resistance 0.5530. We had hoped a test at this level would produce a modest bounce to support-turned-resistance at a downward sloping trend line dating back to mid-July and look to establish short. In fact, the pair continued lower to see a feeble attempt at a reversal above 0.5360 negated by a large Bearish Engulfing. Prices have now moved to test double bottom support near the 0.52 level. Should the pair bounce higher, we will gain look for a test of the aforementioned trend line to establish short. Otherwise, a we will position to sell the pair on a daily close beyond current support.



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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