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AUD/USD, EUR/USD Test Range Lows, NZD on the Edge

AUD/USD, EUR/USD Test Range Lows, NZD on the Edge

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- AUDUSD, NZDUSD hold October swing lows on test.

- EURUSD seeing follow through on yesterday's hammer.

- Monetary Policy on Trial with RBA, ECB, and NFPs this Week

The US Dollar's rally is starting to feel a bit long in the tooth now, even after the Bank of Japan's wildly overhyped easing measures propelled USDJPY through ¥114.00 yesterday. Although the buck gapped higher to start the week, a lack of follow through and signs of technical reversals raises the alarm a few days ahead of major event risk.

Three pairs in particular - AUDUSD, EURUSD, and NZDUSD - have all fallen to and tested their October swing lows either yesterday and today; but since then, reversal candles (hammers, inside days, engulfing bars) have started to form. Perhaps the gap higher in USDJPY and the USD-complex was an exhaustion gap.

The New Zealand Dollar looks particularly weak, sitting on the verge of declines in NZDUSD as well as AUDNZD. If anything, AUDNZD offers some insight as to which high beta FX name to use: for now, NZD appears to be staring off the edge of a cliff.

Read more: No QE This Week from ECB, but Prospect of Easing Haunts Euro

--- Written by Christopher Vecchio, Currency Strategist

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.