Strategic trade
Trade view / 17 August 2016 at 7:22 GMT

Three scenarios for selling USD rallies

Analyst / PIA First
United Kingdom

USD Index: With Federal Open Market Committee minutes due this evening it is all about the US dollar today. Intraday trading will probably be mixed (mild USD bullish bias). 

Technically, the index looks to have completed a choppy correction on the daily chart. Note that the move higher can be counted in three waves with the inner patterns also in three. This is common in corrective formations. We are still holding within the channel and the safe ‘bet’ today would be to sell USD on a break of 94.23

USD daily - choppy correction complete
 Source: Saxo Bank

The intraday chart highlights a potential bullish ascending triangle formation (dips to be bought this morning). A break of 95.02 and we could see a strong corrective recovery to 95.65. That would nearly wipe out yesterday’s USD losses. We don’t expect that be sustained through the FOMC minutes. 

USD Index intraday – scope for buying off ascending triangle
USD 15
 Source: Saxo Bank

With this in mind we are going to highlight three setups that reflect selling into USD rallies today: 

EURUSD – Back up against the breakout level from the expanding wedge formation. 

EURUSD Daily - Retest of wedge breakout
 Source: Saxo Bank

A correction count has been posted on the four hour so there's ample scope for a temporary top to be in place. The previous swing high is seen at 1.1232. Bespoke support is at 1.1230. Yesterday’s Marabuzo level is at 1.1230. This is our prime level to get long today. This is the weakest of the setups as we believe EURGBP has room to move lower now. 

EURUSD Intraday - swing high, Marabuzo and bespoke level offer support
Source: Saxo Bank

GBPUSD – Five-wave bullish count to the upside (Elliott Wave). We have rejected our bespoke resistance at 1.3060 and expect this barrier to be sustained in morning trade. It's far too early to tell but we could form a bullish reverse Head and Shoulder with dip buying close to 1.2925 today. This also offer superb risk/reward as the target level on a break of yesterday’s high would be 1.3280 (40 pip stop). 

GBPUSD Intraday - stalls at 261.8% and bespoke resistance - buying dips
Source: Saxo Bank

USDCAD – An impulsive move to the downside stalled close to the 161.8% extension level of 1.2837. This can be seen as the third wave in a bearish Elliot Wave formation. The hourly chart did post a bullish Outside Bar so the immediate bias is mildly bullish. However, the move higher is assessed as being a 4th wave correction so we prefer to sell into rallies. Bespoke resistance is at 1.2949. The 38.2% pullback of the last wave is seen at 1.2950 (remember we could see strong USD buying off the ascending triangle). This will be our area to get short today. The 261.8% extension level is seen at 1.2580 offering great risk/reward (40 pips stop). 

USDCAD Intraday - Elliott Wave count suggests selling into rallies
Source: Saxo Bank

— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more


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