At the end of July we posted an article that warned for a potential big trend on the US Dollar (Big Trend Warning: the US Dollar Ready for Major Lift Off in 2nd half of 2014). Although more confirmation is certainly required, that forecast from a month ago is showing a lot of potential especially versus the Great British Pound. This trading week however has also provided USD strength breakouts versus the Euro and Yen. The summer consolidation could be breaking and the pairs might be awakening from the August slowdown.
The main question remains: will there be a major US Dollar bullish trend in the remainder of 2014? The FOMC statement, which was released on Wednesday, was more hawkish than expected according to most traders and analysts. But with the Jackson Hole Symposium on Thursday, Friday and Saturday, plus the speeches from FED chairman Yellen and ECB president Draghi on Friday, many pieces of the puzzle remain unsorted. Today’s article makes an overview of the USD against numerous pairs to place the spot light on the technicals.
EURUSD: BREAK OF RISING WEDGE
The break of the rising wedge chart pattern formation on the weekly chart (purple lines) remains strong. There was a slight consolidation pause the last 3 weeks, which were doji weekly candles, but this week’s breakout keeps the EURUSD very bearish. Potential support could be present at 1.31, 1.30 and 1.2750ish (green circles) as the trend will clash with support at those spots. Whether price will break through them (bearish), consolidate (bearish) or bounce strongly (unknown/bullish) will determine the long-term potential of the EURUSD.
GBPUSD: 180 DEGREE CHANGE
The GBPUSD uptrend lasted for more than a year and 2,000 pips. However all of those gains have been quickly forgotten as the Cable crashes to lower levels week after week. This week is turning out to be another bearish week, just as expected in Monday’s article (hope you made some pips on that trade setup). This would be the 7th bearish weekly candle in a row. Although at some point a short covering could push the GBPUSD upwards for a retracement, it seems likely that the downtrend will continue in the long-term.
AUDUSD: CONSOLIDATION AROUND THE CORNER?
The AUDUSD has remained in a tight range (red and green lines) of +/- 150 pips for the majority of the last 4.5 months. But as the USD strengths, the AUDUSD is reaching a breakout point of this zone. If price manages to break below support (green) at +/-0.92, then a breakout scenario on the AUDUSD could translate into a major fall to retest the bigger bottom at 0.8660.
NZDUSD: DOUBLE TOP LEADING TO FALL
The Kiwi too has had many bearish weekly candles in a row. The downtrend started when the NZDUSD made double top (red line) at the historical high of the last 20 years. It will be interesting to see if this week’s closing price can stay below the broken weekly support level at 0.84. A strong close near the low and the broken bottom could translate into a high likelihood that price is continuing its downtrend.
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