Weekly Currency Index Technical Analysis – 9 March

Currency Index Notes:

From last week’s analysis we recommended long positions in CADJPY, AUDJPY and AUDNZD while taking short positions in EURAUD and EURCAD. As of the end of the week, the recommendations worked out as follows:

CADJPY: Down -0.13% or 1.27 pips
AUDJPY: Down -0.42% or 0.394 pips
AUDNZD: Gain +1.34% or 138.1 pips
EURAUD: Gain +1.99% or 285 pips
EURCAD: Gain 2.15% or 300.4 pips

For the week ahead, we suggest to close out all the positions*.
*Correction: Continue to hold buy position in AUDNZD

Australian Dollar Index

  • As noted for the past few weeks, the Australia dollar index managed to break the short term resistance at 1.5128 to push higher towards 1.5344
  • From the daily charts, we notice a strong rejection candlestick formed on Friday’s close
  • This could mean that price would either fall back to 1.5128 to retest the resistance more clearly or that the test to the resistance at 1.5344 is complete and we could anticipate a decline in the Australia Dollar
  • In this aspect, it would be best to stay aside AUD currency crosses and book partial profits and let the remaining positions trade risk free.
Australian Dollar Index Weekly Analysis – 07/03/2015
Australian Dollar Index Weekly Analysis – 07/03/2015

Conclusion: Australian Dollar could be heading in any direction on a test of the broken resistance for support. Hence it is best to minimize positions in the Australian dollar for the week ahead.

Canadian Dollar Index

  • The Canadian Dollar has managed to rebound from the lows near the lower price channel to close above the 100% Fib level of the bearish flag
  • Weekly price action is bullish for the Canadian dollar but in the short term price action looks a bit bearish from the daily time frame
  • We could expect a dip back to 1.5534 before the bullish trend resumes, reaching up to the 1.5917 level off the larger bearish flag pattern
  • Expect to see a decline in the short term before the Canadian dollar resumes its medium term bullish trend
Canadian Dollar Index Weekly Analysis – 07/03/2015
Canadian Dollar Index Weekly Analysis – 07/03/2015

Conclusion: Book partial profits on the Canadian Dollar but look to build new positions on signs of a bullish candlestick pattern from the daily time frame

Euro Index

  • The Doji candle that we noticed three weeks ago proved to be right as price action turned lower for the last two weeks
  • The main question is will this turnaround see a drip down to 2.1286 the next support level?
  • From the daily charts, price could form a somewhat double bottom pattern, so stay on alert in the Euro currencies although it seems a weak view considering price hasn’t yet tested support at 2.1286
Euro Index Weekly Analysis – 07/03/2015
Euro Index Weekly Analysis – 07/03/2015

Conclusion: Remain short on Euro cross currencies especially against stronger currencies.

Sterling Index

  • As expected from last week we noted that a decline back to test the 2.9612 broken resistance for support is likely
  • The Sterling Index closed on a very bearish note last week but just a few pips short from the support level at 2.9612 levels
  • From the daily charts, we notice a bearish engulfing candlestick pattern formed, so it shows a continuation of the declines
Sterling Index Weekly Analysis – 07/03/2015
Sterling Index Weekly Analysis – 07/03/2015

Conclusion: Remain short on GBP if you have already but keep an eye when price reaches 2.9612

Yen Index

  • From the weekly charts it seems that the Japanese Yen closed bearish after the previous week’s doji candlestick formation
  • So does this imply that the break out to the upside was a head fake? We will have to wait and see how this week unfolds
  • Price action from the weekly does offer a logical view that a dip down to the support at 60.683 or the short term support at 60.945 is most likely before we can see any upside thrust
  • Daily charts show a close down to the 60.944 short term support noted but it would make more sense to see a close down to 60.683 level which will show a strong support of both the 200 daily EMA and the major horizontal support level
Yen Index Weekly Analysis – 07/03/2015
Yen Index Weekly Analysis – 07/03/2015

Conclusion: Yen is likely to strengthen this week but is close to a move to the upside (weaken)

Kiwi Dollar Index

  • Price action closed strongly bearish last week and that too near a previously noted resistance level indicating a shift to the downside
  • Daily charts shows price supported by the 200 day EMA so we can expect a bounce to the upside before the decline resumes
  • Next downside target comes in at 1.442 levels and the trend line with the major support at 1.42
Kiwi Dollar Index Weekly Analysis – 07/03/2015
Kiwi Dollar Index Weekly Analysis – 07/03/2015

Conclusion: Stay short on Kiwi

US Dollar Index

  • After entering a consolidation phase Dollar Index broke to the upside with a strong momentum
  • This indicates that the US Dollar is resuming its bullish trend and the next resistance lies at 1.9922 quite close to current price
  • From the daily charts, we notice price breaking above 1.9612 so a decline to this level cannot be ruled out before attempting to test 1.9922
  • As of now, daily charts are strongly bullish so it is best to stay aside and look to buy the Dollar on a dip down to 1.9612 levels
US Dollar Index Weekly Analysis – 07/03/2015
US Dollar Index Weekly Analysis – 07/03/2015

Conclusion: Keep long positions but look to build new long positions on a test of 1.9612

Prepared with LiteForex Currency indices

Given the above view, we recommend to short NZDUSD on a bounce during the week preferably near 0.74/0.75 levels targeting 0.72, short GBPAUD, GBPCAD but exit by end of week, sell and hold AUDUSD, NZDCAD, buy USDJPY on a dip