Near-term Setups in USD/CAD, USD/JPY and USD/CHF

Here’s an update on a few of the setups we’ve been tracking this week. For a complete breakdown of these setups and more, review this week’s Strategy Webinar.

Fading USD/CAD Strength

USD/CAD 240min Price Chart

USD/CAD turned from critical resistance last week, shifting our focus towards basic channel support- the subsequent break has lost steam here at monthly open support at 1.2829. Price has set a clean weekly opening-range and the immediate focus is on a break- a topside break would look for a run towards confluence resistance at 1.2968/77 (area of interest for exhaustion / short-entries). Bearish invalidation stands with the upper median-line parallel at 1.3053. Downside targets are unchanged from last week’s USD/CAD update with a break lower targeting 1.2789 backed by the trendline confluence at ~1.27.

USD/CAD IG Client Positioning

• A summary of IG Client Sentimentshows traders are net-long USDCAD- the ratio stands at +1.03 (50.7% of traders are long) – weak bearishreading
• Long positions are 4.7% lower than yesterday and 38.1% higher from last week
• Short positions are 5.8% lower than yesterday and 42.5% lower from last week
• We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDCAD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USDCAD-bearish contrarian trading bias.

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USD/JPY Low in Question, Near-term Exhaustion in Focus

Price boke below the monthly opening-range last week but an outside-day reversal off support yesterday calls into question whether the pair has put in a near-term low. The immediate focus is on a possible exhaustion pullback from near-term resistance ahead of 106.66– assessing if/where this pullback fails will be a tell for the medium-term outlook. I highlighted this setup including the near-term trading levels in today’s USD/JPY Scalp Report.

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USD/CHF: Breakdown or Fake-out?

USD/CHF 240min Price Chart

Last week we highlighted a short-bias in USDCHF after price reversed from slope resistance, noting that “The lower parallel rests with the Monthly open at 9445 and a break below this level is needed to fuel the next leg lower targeting 9424, 9378 and 9333.” The pair slipped below support early this week before recovering back above the weekly open.

If this recovery holds below confluence resistance at 9518/30, the downside play would still have merits. Ultimately a breach above the monthly high-day close at 9564 would put the broader long-bias back in focus.

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-Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michaelon Twitter @MBForex or contact him at mboutros@dailyfx.com