Candlesticks

US Dollar Set to Rise Against Forex Majors as Risky Assets Falter

Wednesday, 22 April 2009 00:59:36 GMT  |  Ilya Spivak, Currency Analyst

The US Dollar looks set to resume upward momentum against the spectrum of major currencies, boosted by evaporating risk appetite across financial markets. New entry opportunities have now materialized against the British Pound as well as the Australian and New Zealand Dollars.

EUR/USD

 

Strategy: Short at 1.5510, Targeting 1.2456

 

Weekly Profit / Loss: +296 pips

 

We first sold EURUSD at 1.5510. In our last report, we opted to remain short as prices tested the 1.31 level, a juncture that has acted as both support and resistance in recent months. We cited the series of lower highs since the latest major up move topped out in mid-March as cause for a bearish bias, looking for a break of near-term support to challenge the double bottom near 1.2460 once again. Prices have validated this position thus far, breaking below 1.31 and easing past the psychological barrier at 1.30. We may be a choppy ride lower as prices work through the congestion region ahead but our target initial target from here remains near 1.2460. Importantly, this will be a “soft target”, meaning we will look for it to be the next important juncture but will not actually place a hard take-profit order there, expecting the long-term bearish trend to continue in the months ahead.

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

GBP/USD

 

Strategy: Short at 1.4678, Targeting 1.3731

 

Our expectations of a GBPUSD double top ahead of the 1.50 level look to have been validated: prices broke out of a rising wedge formation established from late February to early March showing a convincing Three Black Crows candlestick pattern. GBPUSD has now retraced to re-test support-turned-resistance at the range bottom, tilting risk reward into favorable territory. We will enter short from here, initially targeting a return to the double bottom at 1.3731, and keep a stop-loss at 1.5083 above the 04/16 wick high.

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

USD/JPY

 

Strategy: Flat

 

Despite a breakout past resistance in the in the 99.11-99.73 congestion region, we had opted to tread with caution and hold off on an outright long USDJPY position. This proved wise: USDJPY broke back lower to meet trend line support at a rising trend line established from the low in January. Once again however, we will remain on the sidelines: the Japanese Yen’s relationship with risky assets seems to be strengthening once more, and given our expectations of a downward reversal in global equities it seems best to hold off on this pair for the time being.



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

USD/CAD

 

Strategy: Long at 1.2188, Targeting above 1.30

 

Weekly Profit / Loss: -14 pips

 

We initially bought USDCAD 1.2188. We chose to remain short despite a break below support at a rising trend line established from the low in November 2008, noting a falling wedge formation indicative of a bullish reversal. Indeed, prices rebounded from the wedge bottom and overtook the trend line once again. We will look for bullish momentum to continue from here, seeing initial resistance at 1.2670 but aiming for a break higher to challenge the major top near 1.30.



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

AUD/USD

 

Strategy: Short at 0.7123, Targeting 0.6573

 

Although AUDUSD overshot our initial expectations of triple top below 0.7250, a bearish reversal has indeed materialized. Prices have put in Hanging Man candle with next-day bearish confirmation and then proceeded to crash through support at a short-term rising trend line that has guided the most recent upswing since early March. AUDUSD has now retraced about half of the initial drop, creating a favorable risk-reward profile for a short entry at current levels. We will initially look for the pair to fall to 0.6573 and aim for a challenge of long-term trend line support (currently at 0.6415) to follow shortly thereafter.



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

NZD/USD

 

Strategy: Short at 0.5644, Targeting 0.4910

 

Like its Australian counterpart, NZDUSD has put in a Hanging Man candlestick with bearish next-day confirmation and followed up with a clear break back below resistance-turned-support at the upper boundary of a falling channel that has contained the pair since mid-October. Prices have now retraced to re-test this juncture, offering attractive risk-reward positioning to enter short. We will target the previous swing bottom at 0.4910 and maintain a stop-loss at 0.5997 above the 04/06 wick high.



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

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

 

 

 

Resources

• free demo account
• forex courses
• open an account
• forex stream
• free webinars