EUR/USD bounce likely to be short-lived
EUR/USD has been moving higher overnight, following a bounce from the Fibonacci expansion derived from this week’s market ‘v’ top levels. The move higher has found resistance just shy of the 100% expansion and appears to be selling off again. Given the outlook for the dollar, this would fit with my idea of further dollar strength today.
The current candle is attempting to form a bearish engulfing pattern, which would require a four-hour close below $1.0942. Should that occur, it would be the signal I would need to expect the selloff to resume. At which point my major support levels to watch would be at $1.0894, followed by $1.0846 and $1.0819.
USD/CAD likely to create new ten-year high
The US dollar strength we have seen is providing a double-whammy effect against the Canadian dollar, which has a high sensitivity to oil prices. Given that commodities are priced in dollars, the strength of the US dollar would not only lead to USD/CAD strength, but it would also diminish oil prices, thus leading to further downside for the CAD. For that reason, I believe we will see the recent strength continue, and this will likely lead to a new ten-year high either later today or on Monday. That would mean a move back towards and above the recent C$1.31 high. Bear in mind that the C$1.299 support level is key here and as long as the price remains above that level I would be very confident in my bullish outlook.
USD/JPY bullish engulfing points to further gains
This morning has seen a bullish engulfing pattern following an overnight retracement, much in the same way as the other charts we have looked at. This is the signal that I have been watching out for to give me confidence that this selloff is over for USD/JPY, and thus I do expect a subsequent move higher.
The stochastic is turning around to reflect this bullish shift in sentiment and the likeliness is that we will see a move back to the recent ¥124.6 high before the end of the day, which was the 38.2% Fibonacci expansion from the July low, high and subsequent retracement to ¥123.0. With that in mind, My next resistance levels to watch would be at ¥124.56, ¥125.04 and ¥125.52. Followed by the June peak of ¥125.86.