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US bonds sold off on Friday, with the 10 year yield posting a small reversal candle. This is helping to provide a bid for the USD against major FX currencies. EURUSD posted a weekly reversal candle and looks to extend downside while USDCHD and USDJPY extended their recent gains following last Tuesday’s daily reversal candles. We expect the USD to continue to strengthen in the short term.
Tactical opportunities
• USDJPY upside extension looks towards our targets near 108.75 before a top can form.
• EURUSD weekly topping candle signals lower. A move below 1.1360 would open targets towards the 1.1215 range lows.
• USDCHF rally extension points towards the 0.9800 range highs next.
FX Chart Focus and Levels
AUDUSD downside range break lacks previous levels of activity. We expect a period of consolidation. A beak below 0.7330 on increased volume is needed to signal lower towards 0.7210.
Daily volume rankings and highlights
FX at a Glance
EURUSD: A weekly topping candle encourages our bearish view. A move below our initial targets near 1.1360 would signal lower towards 1.1300 and then the 1.1215 range lows.
USDJPY: No change. We are bullish in the short term and look for a squeeze higher in range towards the 108.75 area, where we would look for signs of a top. Overall, we are bearish towards 105.20 and then 100.75.
GBPUSD: A move below our initial downside targets in the 1.4390 area would signal further weakness. Our next targets are towards 1.4300.
USDCHF: We are bullish. The move above resistance near 0.9725 signals further upside scope towards the 0.9800 range highs.
EURJPY: We are neutral. A small basing candle on Friday signals short-term upside towards the 123.55 area. Overall, we prefer to fade upticks while the greater range highs near 126.50 caps. Our downside targets are towards 119.90, near the monthly cloud base and then 118.75/115.35.
EURGBP: We are neutral. Lack of follow through following Thursday’s bearish engulfing candle keeps us sidelined for now. A break either side of the 0.7950/0.7860 would help to provide short-term direction.
EURCHF: Friday’s rally encourages our bullish view. Our nearby targets area in the 1.1115 area. Beyond there, we are looking towards the 1.1200 range highs.
AUDUSD: We have turned neutral having reached our initial targets near 0.7330 and expect a period of consolidation. A break below 0.7330 on increased investor volumes would encourage us to re-instate our bearish view towards 0.7210 next.
NZDUSD: No change. We are bearish against the 0.7055 range highs. A break below nearby support in the 0.6805 area would confirm a top under 0.7055 and open targets near initial targets near 0.6760. Measured targets for the top are towards 0.6665 and then 0.6545.
USDCAD: We are cautiously bearish USDCAD following a weekly key reversal candle. For now, we prefer to fade upticks against the 1.2995 range highs and look for a move back in range towards the 1.2460 lows. A break above 1.2995 however, would force us to abandon our bearish short-term view in expectation of a stronger upside correction.
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