Market sentiment towards the US dollar appears divided. The Greenback is on the defensive against the Euro, Australian Dollar, and New Zealand Dollar. Meanwhile, both Sterling and Yen look weak and are positioned to lose ground to the USD. The Canadian Dollar pairing looks keen to retain its independent streak, stubbornly refusing to break out of its range trading dynamic.
EUR/USD Strategy: Bullish above 1.5700, Targeting 1.6000 EURUSD began last week range-bound between the highest close of the previous bullish run near 1.5730 and the 1.5900 double top. Markets reacted strongly to the marginally better ISM manufacturing survey, giving the Greenback impetus to rally and take the pair down to the upward-sloping trend line established in early February. Last Friday’s NFP report crushed the dollar bulls’ wishful thinking, and further downside failed to materialize. Current price action is very reminiscent of February’s orderly ascent along the trend line, with consistent bullish days separated by shallow bearish Hammer candlesticks. We continue to hold the view that EURUSD is set to test 1.6000. GBP/USD Strategy: Bearish against 2.00, Targeting 1.9860 We remained flat on sterling last week as we looked for the pair to show a confirmation of directional bias. The current picture looks decidedly bearish, with a downward-sloping resistance trend line capping recent upside retracements. The strongest support looks to be the 61.8% Fibonacci retracement of the 02/20-03/13 rally at 1.9758. Price action has repeatedly bounced higher from this level, working through preceding Fib levels at 2.0002 and 1.9880, setting a lower high and with every try. In the near term, we expect the pair to test this level again with a potential break targeting as low as 1.9360. USD/JPY Strategy: Bullish against 101.50, Targeting 105.15 Bucking negative sentiment towards the dollar following last Friday’s NFP, USDJPY broke out of the range between 100.70 and 98.50 to extend above multi-year support-turned resistance at 101.50. The level has only been tested twice prior to this year, once in 1999 and again in 2005. On both previous occasions, the test sparked a protracted multi-year rally. The level gave way March as USDJPY pushed to a low of 95.71. Last week’s trading established the pivotal level as support once again, with USDJPY consolidating below the 38.2% Fib of the 12/27/07-03/17 decline at 102.89. Our bias has shifted to bullish, seeing USDJPY break through current resistance to test the 50% Fib at 105.15. USD/CHF Strategy: Bearish below 1.0100, Targeting 0.9840 The move below 0.9840 did not materialize last week. Rather, USDCHF continues to oscillate between the 38.2% Fibonacci retracement of the 02/14-03/17 decline at 1.0196 and the record-lowest close at 0.9840. With no substantial evidence to change our stance, we remain bearish looking for a return to the current range’s lows. USD/CAD Strategy: Bullish against 1.0120, Targeting 1.0250 Last week’s bearish bias proved correct, though the decline was not as deep as we anticipated. USDCAD was rejected once again from the top of the long-term 0.9793-1.0250 range (established in August of last year) and declined to the 50% Fibonacci retracement of the 01/22-02/28 down leg at 1.0041. We now notice an upward-sloping trend line connecting recent lows and adding further support near the 50% Fib level. USDCAD rallied from this area above the 61.8% retracement at 1.0120 to find itself in at the bottom of a familiar range, the very same one it had occupied since 03/20. From here, it seems trading will move up to once again find itself at the larger range’s upper boundary. AUD/USD Strategy: Bullish against 0.9287, Targeting 0.9500 Having bounced from support at the long-term trend line established on 08/17/07 as of the writing of last week’s report, AUDUSD returned to that support having failed to build momentum through Fibonacci resistance levels at 0.9157 and 0.9222 (38.2% and 50% of the 02/29-03/20 decline, respectively). On a second bounce from the trend line, AUDUSD overcame the aforementioned hurdles and is now testing the 61.8% Fib level at 0.9287. Should this resistance give way, we see the pair rallying back to test 0.9500. On balance, we may see yet another retracement to support before this Fib gives in. Regardless, our bias continues to favor the upside. NZD/USD Strategy: Bullish against 0.7902, Targeting 0.8100 Last week’s bearish bias proved short-lived. While NZDUSD declined past the 38.2% Fibonacci retracement of the 01/22-02/27 rally at 0.7902, the decline was halted at the intersection of the 50% Fib level at 0.7804 and the upward-sloping trend line established in September of last year. Spending a bit of time ranging between the nearest retracement levels, the pair mounted a top-side brake as USD optimism waned and risk appetite returned to the market. This places NZDUSD between the boundaries of last month’s range between 0.7902 and 0.8217. In the near term, we see the pair oscillating upwards to test the 0.8100 level. To contact Ilya regarding this or other articles he has authored, please email him at ispivak@dailyfx.com.