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USD Scalps Look to Fade Weakness - AUD, NZD, CAD Eye Key Support

USD Scalps Look to Fade Weakness - AUD, NZD, CAD Eye Key Support

Michael Boutros, Strategist

Talking Points

  • GDP/NFP inspired rally takes USDOLLAR into key resistance range
  • AUDUSD November opening range offers conviction on short exposure- Now at support
  • NZDUSD, USDCAD eye key inflection points- looking to fade USD weakness

USDOLLAR Daily Chart

Forex_USD_Scalps_Look_to_Fade_Weakness_-_AUD_NZD_CAD_Eye_Key_Support_body_USDOLLAR_Daily.png, USD Scalps Look to Fade Weakness - AUD, NZD, CAD Eye Key Support

Chart Created Using FXCM Marketscope 2.0

Technical Outlook

  • Key resistance range 10, 581-10,605 still in focus despite channel break
  • Breach targets objectives at 10,623, 10,649, 10,693- 10,704 (July low) and 10,759
  • Interim support at former channel resistance / opening range high ~10,565
  • Support break targets 10,500/09, broader bias constructive above 10,454
  • RSI above 60-threshold for the first time since July- First directional break since June (Bullish)
  • Key Events Ahead: Trade Balance on Thursday and Industrial Production on Friday

Notes: The GDP / NFP combo offered ample support for the greenback with the rally taking the Dow Jones FXCM Dollar Index into a key resistance range between 10,581- 10,605. The dollar is vulnerable below this mark in the near-term and while we remain constructive, daily RSI does have a pending downside trigger which if hits, would suggest that a near-term correction may be at hand. A break back below former channel resistance, targets subsequent support targets into the monthly range lows ~10,492. Bottom line, I’ll look to buy on the dips/breaks of resistance with only a break below 10,454 invalidating the broader advance off the October lows. A breach (close) above 10,605 warrants long exposure with a move passed 10,623 validating last week’s channel break.

AUDUSD Daily Chart

Forex_USD_Scalps_Look_to_Fade_Weakness_-_AUD_NZD_CAD_Eye_Key_Support_body_AUDUSD_DAILY.png, USD Scalps Look to Fade Weakness - AUD, NZD, CAD Eye Key Support

Technical Outlook

  • AUDUSD November opening range break warrants short exposure
  • Initial support objective 9325/35, break targets 9265 and key support at 9206/20
  • Resistance at 9426, 9516 – Bearish below 9552 (Nov high, 23.6% Fib, TL resistance)
  • First Daily RSI break sub-40 from overbought conditions since May 2012 (Bearish)
  • Key Events Ahead: Docket is light - Watch China headlines

Notes: The AUDUSD setup featured last week is in play after breaking below key support at 9426 post-NFPs. The move constitutes a break of the November opening range and further validates the break of channel support late last month. As such, the broader bias remains weighted to the downside and we’ll look lower as we head deeper into November trade.

Near-term support comes into play around 9324-9335 and may offer a brief reprieve for the battered Aussie. As such, we will remain prudent as we head into this region with a breach above RSI trendline resistance likely to offer more favorable short entries higher up. Short-side exposure is warranted below 9324 with objectives eyed at the 100-day moving average, currently at 9265, and a key Fibonacci confluence at 9206-9220. Bottom Line: looking to sell rallies/breaks of support with bearish invalidation now brought down to 9550.

NZDUSD Daily Chart

Forex_USD_Scalps_Look_to_Fade_Weakness_-_AUD_NZD_CAD_Eye_Key_Support_body_NZDUSD_DAILY.png, USD Scalps Look to Fade Weakness - AUD, NZD, CAD Eye Key Support

Technical Outlook

  • Key support objective at 8180- 8214 holds- Resistance 8325/40 and 8409
  • Broader outlook remains bearish below 8409
  • Support break targets objectives at 8088-8113 and 8011/15
  • Daily RSI holding just below 50- Support trigger break to offer conviction
  • Key Events Ahead: RBNZ Financial Stability Report tomorrow

Notes: I highlighted this daily NZDUSD setup last week and the outlook remains unchanged as the pair once again tests key support after reversing with precision off the 61.8% retracement of the decline off the October high. While not quite as compelling a setup as the AUDUSD, the near-term bias remains weighted to the downside with bearish invalidation now brought down to 8409. That said, the pair has now put in a well-defined monthly opening range between 8209 – 8414 and we’ll need a break/close below this range to validate our directional bias. Bottom Line: Looking to sell rallies with a break below 8180 offering conviction on short exposure into objectives at 8088- 8113 and key support at 8011/15. In the event of a support break, we’ll also look to put the AUDNZD setup into play as well.


USDCAD Daily Chart

Forex_USD_Scalps_Look_to_Fade_Weakness_-_AUD_NZD_CAD_Eye_Key_Support_body_USDCAD_DAILY.png, USD Scalps Look to Fade Weakness - AUD, NZD, CAD Eye Key Support

Technical Outlook

  • USDCAD rally halts at near-term resistance range 1.0485- 1.0507
  • Breach targets 1.0567, 1.0617 and key resistance 1.0654/56 (1.618% Ext/ 2011 High)
  • Support 1.0416/20 – Constructive above 1.04 (Bullish invalidation)
  • Sub-1.04 targets 1.0380, 1.0330/43 and 1.0304
  • Daily RSI struggling above 60-threshold suggests near-term momentum waning
  • Key Events Ahead: Bank of Canada Quarterly Review on Thursday

Notes: The volatility isn’t all that impressive with a daily ATR of just 50 pips, but the levels have been very clean. The USDCAD is pressing resistance for the second time since the rally off the October low with a breach here putting our topside targets in view. If the USD corrects lower in the near-term as we expect, look for the pullback to offer favorable long entries with our bias weighted to the topside above the 1.04-handle. A break below this figure shifts our focus to channel support dating back to the September lows and a longer-dated channel support dating back to the 2012 low.

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---Written by Michael Boutros, Currency Strategist with DailyFX

For updates on these setups and more follow him on Twitter @MBForex

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