Dollar Strength To Continue Against Major Currencies

EUR/USD

Strategy: Bearish below 1.5800, Targeting 1.5343

As we expected, a light US calendar saw technical levels be the guiding principle behind EURUSD price action last week. Our target of 1.60 was hit mid-week, followed soon after by a sharp breakdown past trend line support. As we had speculated here on numerous occasions, the run to 1.60 owed more to momentum than underlying fundamental outlook. Having touched the psychological level being aimed at, Euro bulls gave up. The decline looks to be supported at 1.5560, the 23.6% Fibonacci retracement of the 02/08-03/17 rally. We see a retracement to just below 1.58 in the near term as current losses are consolidated, followed by a decline to the 38.2% retracement at 1.5343.

GBP/USD

Strategy: Bullish against 1.9787, Targeting 2.0092

Last week we opted to remain flat on GBPUSD as the pair oscillated between the 23.6% and 50% Fibonacci retracements of the 03/14-04/15 decline in search of a direction. Following the most recent test of the downward sloping trend line resistance-turned-support established at the 03/14 high, GBPUSD has pushed higher to close above the 38.2% Fib level at 1.9903. The daily chart suggests symmetry between the most recent test of the 50% Fib and psychological resistance level at 2.00 and the one on 04/04. A continuation of this symmetry would take the current rally to the 61.8% Fib at 2.0092.

USD/JPY

Strategy: Bullish against 103.70, Targeting 105.19

Last wee we advocated being long USDJPY above 102.90, the 38.2% Fibonacci retracement of the 12/27/07-03/17 decline. This proved wise, as the pair rallied to surpass the 104.00 level. We now notice an upward-sloping trend line connecting recent lows that has guided price action since the bottom above 95.00. This trend line would suggest a retracement to 103.70 followed by continued upside. As we have noted for several weeks now, we see USDJPY test the 50% Fibonacci retracement at 105.19.

USD/CHF

Strategy: Bullish against 1.0201, Targeting 1.0547

Last week, USDCHF broke out higher of its range between the 23.6% and 38.2% Fibonacci retracements of the 02/14-03/17 decline. The move was catalyzed by the broad US dollar rally following the Euro's rejection at 1.60. The rally has neatly topped out at the 50% Fibonacci retracement at 1.0375. This will likely prove to be a retracement point, seeing the pair ease back to find support at 1.0201 before resuming higher towards the 61.8% Fib at 1.0547

USD/CAD

Strategy: Bullish against 1.0039, Targeting 1.0250

Last week we saw significant support established at the intersection of the 50% Fibonacci retracement of the 01/22-02/28 decline and an upward sloping trend line established in November of last year. We looked for the pair to rally, and so it has. USDCAD has rallied past the 61.8% Fib at 1.0120 and has stabilized there. Our view here remains unchanged from last week. We see the pair continue to rise for a test of the long-term range top at 1.0250.

AUD/USD

Strategy: Bullish against 0.9287, Targeting 0.9500

Last week opened with AUDUSD breaking past 0.9400. We remain with our bullish bias, looking for the pair to reach 0.9500. Similarly to the EURUSD, this trade saw AUDUSD hit our target and break down soon after as 0.9500 became a double top. The down move was contained at 0.9287, the 61.8% Fibonacci retracement of the 02/28-03/20 decline. We maintain that as long as AUDUSD remains above trend line support, the up-trend is intact. That said, current positioning does not offer particularly favorable risk-reward parameters. The pair is currently stalled below psychological resistance at 0.9400. We will look for a retracement back to Fib support at 0.9287 for a long position targeting a return to test 0.9500.

NZD/USD

Strategy: Bearish against 0.7850, Targeting 0.7700

Our analysis missed the mark on NZDUSD last week. We had been looking at a long-term supporting trend line established in August and reinforced by the 38.2% Fibonacci retracement of the 01/22-02/27 rally at 0.7896. NZDUSD price action negated this assessment as the pair decisively crashed through the trend line and the 50% Fib. This amounts to a trend change, with our bias shifting to bearish and eyeing a decline to the 61.8% Fib at 0.7700.

DailyFX

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