Currency Cross: Technical Outlook 07-02

Euro / British Pound

Last update: “The larger EURGBP trend is down towards 7600-7700 (October 2008 low and Fibonacci extension).  Still, the decline may be interrupted for at least several days as a larger corrective pattern takes hold.  The rally from 8066 is an impulse (5 waves) and probably wave a of an a-b-c correction.  After formation of a b wave low, expectations would be for a c wave rally to test initial resistance at 8280.”  The EURGBP reached 8300 but failed to reach its 100% extension of 8330.  Still, 5 waves can be counted within wave c so a top may be in place.  Favor the downside.

Euro / Canadian Dollar

A sharp move clarifies a specific market’s wave structure by indicating its 3rd or C wave position. In the case of the EURCAD, the rally from 12515 is most likely a 3rd wave (and from 12695 a 3rd of a 3rd). Expect price to slide lower towards 13200, which intersects with its Elliott channel on Wednesday. A drop to there would present a buying opportunity to participate in a 5th wave advance towards 13500.

Euro / Australian Dollar

The short term EURAUD pattern is the same as that of the EURCAD. Expect a small 4th wave correction with support at 14700 over the next few days. 14700 intersects the Elliott channel on Wednesday.

Euro / Japanese Yen

The EURJPY has rebounded from its lowest level since 2001 and the short term picture looks similar to the EURCAD and EURAUD. The advance from 10750 is either a c wave or iii wave within a larger advance. The structure of the decline from current levels will tell us what to expect next. 10950 is potential support (watch the channel). It is best to stand aside for now. “Longer term (months), an objective is 9170 (100% extension log scale), or just above the 2000 low. 9987 (close to parity) is also potential support.”

British Pound / Japanese Yen

The GBPJPY sideways trading over the last month is probably a B wave triangle. The triangle is nearing completion and will likely come to an end in the next few weeks. The implications are bullish…then bearish. A terminal thrust higher in wave C will complete the A-B-C rally from the May low before a top forms and the downtrend resumes. I am waiting for completion of the triangle before positioning for the C wave thrust higher.

Canadian Dollar / Japanese Yen

The CADJPY has traded below 8240 and an objective remains 7850 (100% extension and 2009 low). Near term resistance is 8360 and 8480.

Australian Dollar / Japanese Yen

A break below the May low is expected, with weakness likely extending to 6600 (100% extension). Near term, it is possible (again…like the CADJPY) that 5 waves down from 8090 are nearing completion (or even complete). With this in mind, there will be better levels to initiate short positions. Resistance next week is 7510, 7600, and 7695.

Jamie Saettele publishes Daily Technicals every weekday morning, COT analysis (published Friday evenings), technical analysis of currency crosses on Monday, Wednesday, and Friday (Euro and Yen crosses), and intraday trading strategy as market action dictates at the DailyFX Forum.  He is the author of Sentiment in the Forex Market.  Follow his intraday market commentary and trades at DailyFX Forex Stream.   Send requests to receive his reports via email to jsaettele@dailyfx.com.