NZD/USD

* Bias determined by the relationship between price and various EMAs. The following hierarchy determines bias (numbers represent how many EMAs the price closed the week above): 0 – Strongly Bearish, 1 – Mildly Bearish, 2 – Neutral, 3 – Mildly Bullish, 4 – Strongly Bullish.

EUR/USD

The EUR/USD continued the oversold bounce highlighted in last week’s report , tacking on another 250 pips last week. The pair was given a large boost by the Fed’s 2014 low rate pledge , as well as ongoing speculation that Greek policymakers and creditors would be able to come to an agreement on the appropriate amount of Private Sector Involvement. As the week drew to a close, rates were testing key previous resistance at 1.3200, which will serve a key area to watch this week. Surprisingly, the latest Commitment of Trader data showed a new record in EUR/USD shorts among large futures traders, indicating that the sellers have yet to capitulate and the oversold bounce may have further to run. Meanwhile, the secondary indicators are giving conflicting signals, with the MACD showing strong and accelerating bullish momentum, whereas the Slow Stochastics are showing rates as clearly overbought in the near-term. If the overbought Stochastics lead to a pullback, traders should keep an eye on key near-term support at 1.3000, as well as the 20-day EMA (currently at 1.2971).

GBP/USD

Cable followed the EUR/USD higher this week, putting in its 10 ^th consecutive bullish daily close on Friday. The pair broke above minor resistance at 1.5650 (as highlighted in last week’s report ), opening the door for a continuation up to key previous resistance at 1.5770 early this week. The momentum (MACD) confirms this bullish view, though the Slow Stochastics remain clearly within overbought territory. With strong resistance looming at 1.5770, rates may be due for a pullback this week; traders should watch the 20-day EMA (currently at 1.5544) to put a floor under any pullbacks that do emerge.

USD/JPY

The USD/JPY rode a rollercoaster of volatility last week, but closed only about 25 pips from where it opened the week. The pair rallied sharply to start the week on the BOJ’s bearish outlook . However, the rally stalled directly at key previous resistance at 78.20. In the latter half of the week, the mass selling in the greenback took the USD/JPY back down the bottom of the 3-month range at 76.60. This level represents significant support and may put a floor under the selloff over the course of this week. The secondary studies are not particularly insightful: the MACD shows the mildly bullish momentum is fading quickly, whereas Stochastics show balanced, two-way trade. Finally, note that the early week volatility has shaken out some late sellers: the latest COT data shows large futures trades moderated short positioning to the tune of 14,000 contracts.

USD/CHF

The USD/CHF continued to fall last week as rates shed over 200 pips after gapping higher to open the week. Our note from last week’s report was proven correct: “If the .9300 floor is broken, the pair could continue lower, with the next major level of support located at .9100.” The pair dropped to close last week at .9124, just above the potential floor highlighted last week. With the Slow Stochastics clearly oversold, there is potential for a bounce off support at .9100, but if this level fails to put a floor under rates, the bears will quickly target .9000 support. Lately, the this pair has been trading as the inverse of the EUR/USD, so Swissie traders should check for key support and resistance levels in the Euro before placing any trades.

USD/CAD

The greenback also sold off vs. its northern neighbor last week. Rates broke conclusively below key previous support at 1.0070, an area that had put a floor under the market on at least six previous occasions in the past three months, indicating that the 1.0070 level is likely to cap any rallies moving into this week. Bolstering the bearish case, the MACD is clearly trending lower below its signal line, showing bearish momentum. However, readers should also note that the Slow Stochastics are clearly oversold, indicating the potential for a bounce early this week. Overall, the bias will remain bearish for a potential drop to .9900 support as long as rates remain below previous-support-turned-resistance at 1.0070.

AUD/USD

The Aussie rallied in concert with other higher-yielding currencies last week, extending its gains following the mid-January break of ascending triangle resistance. Rates remain overbought for this week, but note that overbought markets can continue for longer than most traders anticipate; Our note from last week’s report foreshadowed this potential: “…a break and close above 1.05 would turn the bias bullish for further rallies, despite the overbought market.” For this week, the 1.05 level and/or the 20-day EMA (currently at 1.0409) are likely to put a floor under any pullbacks that do emerge. To the topside, bulls will continue to press for a test of 5-month highs at 1.0750.

NZD/USD

The Kiwi, predictably, also rallied against the U.S. Dollar, with rates tacking on nearly 200 pips to trade at 4-month highs near .8240. The MACD continues to trend higher above its signal line, indicating consistently bullish momentum, though rates remain in overbought territory for the third consecutive week. At this point, an early week pullback to bullish trend line support would not be surprising. On the other hand, a break and close above .8240 would pave the way for additional rallies this week.