•Euro reversal likely signals deeper setbacks ahead
•Dollar/Yen poised for additional upside after breaking short-term trend-line
•Cable well capped by 38.2% fib retrace off of multi-year high/lows
•Dollar/Swiss bounces by critical longer-term trend-line support
•Dollar/Cad very well supported by previous resistance zone
•Australian Dollar puts in bearish shooting star-like reversal candle
•New Zealand Dollar gains stall by major 50% fib retracement
EUR/USD - The market has managed to put in 6 consecutive weeks of higher highs including a fresh 2009 high this week by 1.4340, but gains look like they could finally be stalling out with a bearish close setting up on the weekly. Overall, the current rebound has been well capped ahead of the previous 1.4720 trend highs from December 2008 and the market looks set to enter a period of consolidation after failing by the top of the range. Look for a resumption of setbacks over the coming weeks back towards the 1.3400-1.3500 with a break to open a more significant drop towards 1.2500-1.3000. Ultimately, only back above 1.4720 gives reason for pause and a shift in the broader structure. Position: SHORT @1.4210 FOR A 1.3900 OBJECTIVE, STOP @COST.
USD/JPY - Currently testing some shorter term trend-line resistance in the low 98.00's with the market showing a willingness to break out beyond this point. A close above 98.00 is expected to open the door to some more significant gains over the coming weeks with room for a test of critical trend-line resistance which comes in just over 100.00 at present. However, the overall structure remains quite bearish and any rallies towards the falling trend-line resistance should be used as opportunities to build on existing shorts. Position: *LOOKING TO EXIT SHORT FROM 98.00 WITH A STOP @100.20 AND WILL STAND ASIDE.
GBP/USD - Finally looks to have found a medium-term top after stalling out by fresh yearly highs at 1.6665 on Wednesday. The weekly candle looks extremely bearish, and this in conjunction with a failure to close above both the 50-Week SMA and the 38.2% fib retracement off of the major multi-year high/lows from November 2007 to January 2009, suggests that deeper setbacks are in the cards. Look for a break below 1.5780 over the coming sessions to open the door for a more significant depreciation back towards the previous trend highs at 1.5375. Weekly stochastics still reside in overbought territory but are showing a negative divergence which reaffirms our medium-term bearish bias. Only back above 1.6665 negates. Position: SHORT @1.6407 FOR AN OPEN OBJECTIVE; STOP @COST.
USD/CHF - Although the market did manage to break to fresh 2009 lows on Tuesday, a closer look at the longer-term picture shows the market attempting to adhere to major trend-line support dating back to March 2008 when the USD recorded historic lows. With weekly stochastics only just now looking for a positive cross in deep oversold territory, scope now exists for a resumption of the broader recovery structure with gains seen over the coming weeks back towards the previous 2009 lows by 1.1165 at a minimum. We would expect to see any setbacks now very well supported ahead of 1.0600, with only a break back below the 2009 lows at 1.0590 to negate and give reason for pause. Strategy: LOOK TO BUY ON DIPS.
USD/CAD - The break of the multi-week consolidation in the 1.1700 to 1.3000 area opened a furious round of pullbacks over the past several weeks with the market trading down to 1.0785 ahead of the latest minor bounce. However, we contend that a medium to longer-term base is now in place by 1.0785 with the market seen very well supported by this area which acts as a former resistance now turned support. From here, the risks are for a resumption of gains over the coming weeks, with a break above 1.1355 required to officially confirm basing prospects and accelerate gains. Ultimately, we see room for a rally back towards the 1.1500-1.1765 in the month of June. Only back under 1.0785 negates. Position: LONG @1.0807 FOR AN OPEN OBJECTIVE; STOP @COST.
AUD/USD - After finally basing out by multi-year lows in late 2008, the market has managed to recover quite impressively, triggering a double bottom that has now opened a rally to fresh 2009 highs by 0.8265 on Wednesday, ahead of the latest minor pullbacks. However, additional gains are now seen limited, and we contend that a medium-term top is now in place at 0.8265, with the level coinciding with the measured move objective of the double bottom. This in conjunction with a failure to sustain gains beyond the 100-Week SMA, and a very bearish shooting-star-like weekly candle, reaffirms our bearish outlook and suggests that a deeper decline is just on the horizon. We look for a break below 0.7885 to accelerate and expose a retest of the previous neckline from January at 0.7270 over the coming weeks. Only back above 0.8265 negates. Strategy: LOOK TO SELL.
NZD/USD - A string of consecutive weekly higher highs could finally be at an end after the market managed to surge to fresh 2009 highs by 0.6600 on Tuesday. However, the failure by 0.6600 also happens to coincide with the 50% fib retracement off of the major multi-year high/lows from February 2008 to March 2009, making the probability for a medium-term top extremely high. Weekly stochastics confirm the need for a major pullback over the coming weeks, with the indicator on the verge of a negative divergence in overbought territory. Look for a break back below 0.6220 to accelerate declines and open a deeper pullback towards the 0.5600-0.5800 in the weeks ahead. Only back above 0.6600 negates. Strategy: LOOK TO SELL.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com. If you wish to receive Joel's reports in a more timely fashion, e-mail email@example.com and you will be added to the distribution list.
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