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British Pound Retreats Against US Dollar. Will Other Majors Follow?

Summary: Selling the British Pound against the US Dollar earlier this week has proved fruitful thus far, with prices about 300 pips in our favor at the moment....

Selling the British Pound against the US Dollar earlier this week has proved fruitful thus far, with prices about 300 pips in our favor at the moment. Similar reversals appear tentatively in the works against the commodity currencies, while the Euro stands at a trend-defining juncture against the greenback. EUR/USD Strategy: Pending Short Looking at monthly charts, we see EURUSD now stands at a critical juncture marked by support-turned-resistance at a rising trend line that had guided the major 2002-2008 ascent as well as the wick high from December of last year. This is a line in the sand for Euro bears (ourselves included): a break beyond this juncture would negate the long-term downward bias. Shorter-term charts are not offering an attractive entry signal at the moment and we will remain on the sidelines for now. For more resources on the EURUSD, please visit the DailyFX Euro Currency Room. GBP/USD Strategy: Short at 1.6617, Targeting 1.6112 Weekly Profit / Loss: +303 pips We sold GBPUSD at 1.6617 as prices put in an Evening Star on a re-test of support-turned-resistance at a rising trend line established from the swing lows in March. The pair has moved lower as expected, and we will remain short looking for prices to hit the soft target at 1.6112 in the days ahead. A stop-loss will be activated on a daily close above 1.6749. For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room. USD/JPY Strategy: Flat The long-term USDJPY down trend that we previously pointed out remains intact. Turning to the weekly chart, prices have set up a well-defined falling channel from the swing top in April. The last down leg marked by a Dark Cloud Cover candlestick pattern appears to be losing steam at the channel bottom and upward correction is possible from here to test the channel top, now at 96.65. We will opt to stand aside for now, preferring to wait for the upswing and then get short to trade with the dominant trend's bias. For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room. USD/CAD Strategy: Pending Long USDCAD may be on pace to put in a double bottom above 1.0630 with prices hinting at a forming Morning Star bullish reversal pattern. Naturally, the set-up will not be confirmed until we see the close on the current candle, which needs to be above 1.0692 (the mid-point of the 9/16 candle) at minimum for the formation to be valid. Beyond that, we will look for a daily close above falling trend line resistance (now at 1.0876) to enter long. For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room. AUD/USD Strategy: Pending Short The broad outlines of AUDUSD positioning are largely unchanged from what we identified last week, with prices still showing a Rising Wedge bearish reversal pattern with confirmation in negative divergence on the RSI oscillator. An Evening Doji Star top may be in the works at the moment, but as with USDCAD we need confirmation on the close of the current candle (which needs be below 0.8686 at minimum). If this materializes, we will look for a break below the wedge bottom (now at 0.8440) to trigger a short position. For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room. NZD/USD Strategy: Pending Short As with its Australian counterpart, NZDUSD has yielded a Shooting Star but still needs next-day bearish close confirmation on the current candle to make a convincing case that a downward reversal is upon us. Broadly speaking, negative divergence on the RSI oscillator keeps the bias favoring the downside. We will look for a daily close below support at a rising trend line from the lows in March (now at 0.6871) to enter short. For more resources on the NZDUSD, please visit the DailyFX New Zealand Dollar Currency Room. To reach Ilya regarding this article or subscribe to his email distribution list, please contact him at

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Publication:Mena Report
Geographic Code:1USA
Date:Sep 18, 2009
Previous Article:U.K. Public Sector Borrowing Rises Less Than Expected in August.
Next Article:Euro Halts Four-Day Advance, British Pound Weakens for Second Day.

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