FX snapshot – US Dollar Basket, AUD/USD, USD/JPY, USD/CAD

Sterling strength seems to be on the cards with GBP/JPY and GBP/USD looking likely to break into a bullish phase.

Pound and dollar
Source: Bloomberg

US dollar at major support area

The US Dollar Basket has been selling off throughout October. There is clearly the potential for further downside given the size of the previous selloffs down to $92.75 and $94.20. However, the long lower shadow on yesterday’s lowest candle shows clear support existing in this area, which marks the convergence of the ascending trendline and 61.8% Fibonacci retracement.

Very small indecision candles confirm this hesitancy and thus I await a break below $95.23 to gain confidence of a further move lower.

For now we have not seen any signs of a possible reversal and thus there is nothing too major to worry about. However, a move back above $95.78 would bring about an increased potential for a bullish reversal.  

AUD/USD completes double-bottom

The AUD/USD pair has been a standout performer of late, gaining 5% over the past ten days. This morning has seen price break through the key $0.728 resistance level which constitutes a double-bottom neckline.

The easy break of such a key level shows the likeliness that there is still juice left in the tank for this rally and thus I remain bullish.

However, once we do see a retracement, I would be looking for $0.728 to hold up as new support. The next resistance levels I am watching for are at $0.7323 and $0.7351.

USD/JPY bottoms out with further upside likely

We have seen a clear bottoming out for USD/JPY recently and this has been confirmed with a sharp move higher this morning. I expect this to lead to further upside, towards the ¥120.35-¥120.60 resistance zone.

With the stochastic starting to roll over within overbought, there is a possibility of a retracement, however should this occur, I would expect ¥120.10 and ¥120.00 to underpin the rally.

USD/CAD downside could have further to run due to oil breakout

The CAD is strongly correlated with the value of oil, and the recent resurgence of the black stuff has underpinned the major move lower for USD/CAD.

We have now seen a bullish breakout for oil and thus there is a good chance we will see further downside for this pair. While we did see a strong move higher through Wednesday and Thursday, the ability to break back below C$1.2972 was particularly telling. Thus I do expect further losses for this pair, as long as it can move back below C$1.2972 in the near future.

Support levels I will be watching are at C$1.295 and C$1.2856. Conversely I would need to see a move above C$1.3072 to believe we were seeing anything like a bullish reversal for the pair.

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