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US Dollar Retains a Bid Tone
By Jamie Saettele | Published  09/19/2006 | Currency | Unrated
US Dollar Retains a Bid Tone

EUR/USD â,“ The EURUSD rallied to test the 78.6% fibo of 1.2752-1.2630 at 1.2726 but has since slipped back below the 1.2700 figure â,“ and in a convincing fashion.  Support is at the confluence of the 132 day SMA (6 month) / yesterdayâ,"s low at 1.2615/30.  A break below there exposes the 78.6% of 1.2456-1.2938 / 7/26 low at 1.2557/59.  We have focused on price being trapped below the 66 day (3 month) SMA â,“ which is now resistance at 1.2729.

USD/JPY â,“ We have maintained a bullish tone against the â,"support zone from the 38.2% of 115.55-118.14 / 9/12 low at 117.15/36.â,  The last four dayâ,"s lows at 117.33, 117.29, 117.24, and117.23 serve to confirm the support.  However, bulls should be warned of a double top at 118.14/28 (9/12 and 9/18 highs).  Bearish divergence with daily oscillators and CCI declining from above 100 suggests that upside potential is limited.  Perhaps most important is last weekâ,"s IMM futures data.  Commercial buying is at an all time high and the speculative community set a new record for most short contracts.  A break below the daily trendline (on chart below) from 108.96 could trigger heavy selling.

GBP/USD â,“ Cable continues to consolidate and is little changed from yesterday.  Daily oscillators remain bearish and the advance from 1.8753 looks likes a 3 wave correction.  This evidence favors the downside against the 9/14 high at 1.8918.  A break above there would suggest a deeper retracement of the move down to possibly the 78.6% fibo at 1.8985.  The pair remains just above a supporting trendline from the 4/3 low at 1.7249 but below the 22 day (1 month) SMA (currently at 1.8873).  A break below exposes the 9/11 low at 1.8602.

USD/CHF â,“ Last week we focused on the 7/19 high at 1.2595 and mentioned that â,"This is a â,"make or breakâ, point of reference.  Breakout potential exists as the Bollinger bands (daily) are widening from very tight levels.  Reinforcing the bullish view is the break above the 132 day (6 month) SMA on 9/12.  Price had remained below the 6 month moving average since 4/11/2006.  A break above 1.2595 targets the 4/21 high at 1.2822.  The 9/11 low at 1.2393 is support.â,  The USDCHF did exceed 1.2595, trading to a 4 month high to 1.2622 on Friday.  Thus, the previous comments stand.  Initial support is at a supporting line from the 8/31 low (1.2227) / todayâ,"s low at 1.2485.

USD/CAD â,“ Little has changed with regards to the USDCAD over the last week.  The pair dipped to 1.1114, just above the 61.8% of 1.1028-1.1235 at 1.1107 on Thursday and has since rebounded to trade near the 1.1200 figure.  The proximity of that Fibonacci level along with the convincing bounce higher favors a test of 1.1235 (as long as 1.1114 holds).  22 day (1 month) momentum is right at 0 and is close to reaching positive territory for the first time in over a month.  A break above 1.1235 exposes the 8/15 high at 1.1319.  If 1.1114 fails, then a deeper correction towards the 78.6% fibo of 1.1028-1.1235 at 1.1072 may be taking place.

AUD/USD â,“ Fibonacci resistance from the 38.2% of .7721-.7481 at .7573 has held as Thursdayâ,"s high printed at .7568.  This is also former support from the 8/9 low at .7563.  We have maintained a bearish view for a while primarily because of IMM futures data but moving averages are lining up now and reinforcing our view.  The 2 week SMA has moved below the 1 month SMA and price is currently below the 3 month SMA (which is at .7542).  The 6 month SMA is at .7488 along with the 9/13 low at .7481.  A break below that confluence of support could trigger additional selling.  The next bearish target would be the 7/19 low at .7403.  Resistance remains Thursdayâ,"s high at .7568.  A push above there negates the immediate bearish view and suggests that a deeper correction of weakness is taking place â,“ possible towards the 61.8% fibo of .7721-.7481 at .7629.

NZD/USD â,“ Kiwiâ,"s advance has slowed as the pair is nearing a Fibonacci confluence from the 50% of .7468-.5927 and the 61.8% of .7198-.5927 at .6695/.6710.  The 7/8/2005 and 12/23/2005 lows at .6683 and .6700 reinforce the forecasted resistance.  Strength looks overextended as daily oscillators all exhibit bearish divergence with price.  A break below the 9/4 high at .6580 could trigger offers and begin to imply that lower prices lie ahead.  In this case, support would be at the 61.8% of .6341-.6651 at .6460.

Jamie Saettele is a Technical Currency Analyst for FXCM.