The US dollar broke out above its descending triangle, indicating another advance, with a (conservative) medium-term target of 8.80*.
* Target calculation: 8.10 + ( 8.40 – 7.70 ) = 8.80
Forex: Euro and the Aussie dollar strengthen
The euro is testing resistance at the former support level of $1.40, in the hope that the bailout out-lined today will rescue the euro-zone from its debt crisis. We will probably read fairly disparate views over the next few weeks before the varying viewpoints synthesize into a clear market direction. Reversal below $1.365 would warn of a decline to $.20*, while narrow consolidation below the resistance level would suggest a breakout and advance to the 2011 highs.
* Target calculation: 1.30 – ( 1.40 – 1.30 ) = 1.20
The Pound similarly rallied to $1.60. Respect would re-test primary support at $1.53, while breakout would target $1.67.
* Target calculation: 1.53 – ( 1.60 – 1.53 ) = 1.46
The dollar broke support at ¥76, continuing its long-term (mega) down-trend against the Yen. Target for the breakout is ¥72*.
* Target calculation: 76 – ( 80 – 76 ) = 72
The Aussie benefited from the weaker greenback, recovering above $1.04 to signal an attempt at $1.08*. Penetration of the descending trendline indicates that the down-trend is weakening.
* Target calculation: 1.04 + ( 1.04 – 1.00 ) = 1.08
The Aussie and Loonie both closely follow commodity prices. Respect of the upper trend channel on the CRB Index would warn of another down-swing.
Canda’s Loonie is testing resistance at $1.00 against the greenback. Reversal below $0.975 would warn of another down-swing, while breakout above parity would target $1.02*.
* Target calculation: 1.00 + ( 1.00 – 0.98 ) = 1.02
The Aussie dollar completed a double bottom against its Kiwi counterpart (probably due to lost man-hours after celebrating their Rugby World Cup win). Expect a test of $1.32* followed by retracement to confirm support at $1.28.
* Target calculation: 1.28 + ( 1.28 – 1.24 ) = 1.32
The South Africans went home early (from the RWC) and a descending triangle on the USDZAR warns of downward breakout to test support at $7.20.
* Target calculation: 7.80 – ( 8.40 – 7.80 ) = 7.20
Euro rallies on hope of bank rescue
The euro is headed for a test of $1.40 against the greenback, on the hope that European banks will be re-capitalized after taking a haircut on the PIIGS bonds. There still appears to be some confusion — I suspect deliberate — as to who will pay, with German Finance Minister Wolfgang Schaeuble suggesting that banks first attempt to raise money from investors. Given the current state of financial markets, private investment will be scarce and European taxpayers are likely to end up with sizable stakes in a number of banks. Expect resistance at $1.40 to be followed by another test of support at $1.30*.
* Target calculation: 1.40 – ( 1.50 – 1.40 ) = 1.30
The pound is similarly headed for resistance at $1.60. Respect would signal another test of $1.53.
* Target calculation: 1.53 – ( 1.60 – 1.53 ) = 1.46
Canada’s Loonie and the Aussie dollar both benefited from a surge in commodity prices. Expect the CADUSD to find resistance at parity, followed by another test of support at $0.94.
* Target calculation: 1.00 – ( 1.06 – 1.00 ) = 0.94
The Aussie will find resistance between $1.02 and the descending trendline. Respect is likely and would indicate another test of $0.94.
* Target calculation: 1.02 – ( 1.10 – 1.02 ) = 0.94
The Aussie has formed a broad double bottom against its Kiwi counterpart. AUDNZD breakout above $1.28 would signal a primary advance to $1.32*.
* Target calculation: 1.28 + ( 1.28 – 1.24 ) = 1.32
Support is holding firm on the dollar-yen cross — with assistance no doubt from the BOJ. Expect a narrow range between 76 and 78.
The South African rand is testing support at R7.70 against the greenback, after penetrating its rising trendline. Probably because of all the visitors returning early from the Rugby World Cup. 🙂 Apparently they have invited the referee to run a series of clinics in South Africa on his novel interpretation of the forward-pass rule. I suggest that he decline — it could get violent. Failure of support would offer a target of R7.00*
* Target calculation: 7.70 – ( 8.40 – 7.70 ) = 7.00
Rand triangle
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The US Dollar looks like it is forming a triangle against the South African rand. Breakout above the upper border would signal continuation of the advance — with a target of R9.00* — while breach of the secondary trendline would warn of a correction to the longer-term trendline (at 7.35).
* Target calculation: 8.30 + ( 8.50 – 7.70 ) = 9.10