US Dollar Extends Gains, Yields Over 750 Pips

Expectations that the US Dollar would resume upward momentum against the major currencies paid off last week: our open trades moved closer to target levels and added over 750 pips to floating profits. The greenback has now surpassed the highs from 2008 and is poised to extend gains further.

EUR/USD

Strategy: Short at 1.5510 and 1.3364, Targeting below 1.2609

Weekly Profit / Loss: +249 pips

We first sold EURUSD at 1.5510 having identified a break of trend line support. We then added to the position at 1.3364 on a break of support/resistance level above 1.34. Last week, we noted the pair was confined in a falling channel with prices bouncing lower having tested the upper boundary. EURUSD has since fallen considerably lower and is now testing the bottom of the 1.2453-1.2609 congestion area, with a break opening the door to a selloff targeting 1.20. We will remain short, expecting long-term continuation of the bearish trend.

GBP/USD

Strategy: Flat

Last week, we noted that GBPUSD was signaling a downward reversal, showing a Star candlestick with next-day bearish confirmation following a test of resistance at a falling trend line connecting major swing highs from late October. That said, we opted to remain on the sidelines as the magnitude of the initial down move turned risk/reward against entering the position. The bottom line is effectively unchanged at present: as we expected, prices extended lower but money management considerations do not allow for entry. We will continue to watch price action for a viable opportunity in the days ahead.

USD/JPY

Strategy: Pending Long

Last week we closed our short USDJPY position as the pair broke higher out of a falling channel and negated a potential double top at 0.9467. The magnitude of the move skewed risk-reward against taking a long trade, leaving us on the sidelines. Entry conditions have not improved at present and we will remain flat for now looking for opportunities to get long on a corrective downswing.

USD/CAD

Strategy: Long at 1.2188, Targeting above 1.2749

Weekly Profit / Loss: +368 pips

We bought USDCAD as the pair rallied to break past the upper boundary of a bearish channel. Last week we noted that prices have set up a Triangle formation, a continuation pattern that bolsters the validity of a bullish scenario, and opted to continue holding long expecting USDCAD to surpass the recent swing high near 1.2750 for another test of the triple top at 1.30. This outlook has been validated: the pair broke out of the Triangle and now stands squarely ahead of triple top resistance. Prices have paused here showing a Long-legged Doji candle and can reasonably be expected to pull back before the bulls muster enough force to drive prices above 1.30. We will remain long expecting upward momentum to continue, looking for the next leg of the rally to reach above 1.33.

AUD/USD

Strategy: Short at 0.7079, Targeting 0.6072

Weekly Profit / Loss: +157 pips

We sold AUDUSD as the pair showed a Hanging Man with bearish confirmation. Last week we opted to remain short as prices showed a Shooting Star below the 0.65 level, a standby support/resistance axis since late January, hinting that downward momentum was ready to resume. Indeed, prices put in an Inverted Hammer at falling channel resistance and sank lower to pause at near term support marked by the 02/02 close at 0.6312. We will remain short, looking for a break past this level to yield a move to the swing lows near 0.60.

NZD/USD

Strategy: Flat

Last week we saw NZDUSD wedged between support at 0.5035 near the previous swing low and the upper boundary of a bearish channel that has contained prices since December. A breakdown looked imminent as prices showed a bearish Inverted Hammer candlestick followed by a Doji as prices increasingly ran out of room to keep moving sideways. Although a daily close below 0.5035 has materialized, an alternative view on current positioning will keep us on the sidelines at the moment: NZDUSD is showing the potential for a Falling Wedge setup, a bullish reversal formation, with an Inverted Hammer at support and positive divergence on the MACD oscillator as confirmation. While the overall trend bias favors the bears, a corrective upswing may be brewing so we will hold back on selling NZDUSD for now as we see how positioning develops in the coming days.

DailyFX

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