Joel: Rallies have now extended well beyond 1.5000, with the market eyeing next figure support by 1.5100. The overall bullish structure remains firmly intact and any intraday dips are expected to be well supported ahead of 1.4830. Next key topside resistance comes in by 1.5240, the 78.6% fib retracement off of the major 2008 high-lows and we look for this level to be tested over the coming days. Short-term and medium-term technical studies are however looking stretched and any moves beyond 1.5240 are seen limited in favor of a major USD corrective rally. But for now, only back under 1.4830 would negate constructive outlook. Our model is currently running a short position from 1.5010 (stop 1.5110) but the trade has not held up well in the strong trending environment.
Jamie: After trading to 1.5060 the EURUSD has come off slightly, but a drop below 1.4940 is needed to signal a trend change. Keep in mind the larger 5th wave channel that we’ve focused on for weeks. That line is at 1.5086 Monday and increases 11 pips per day. In the event of additional upside, there are measurements concentrated at 1.5185.
BRITISH POUND / US DOLLAR
Joel: While the rally of the past few days has been impressive, the overall structure still looks quite toppish and we would expect to see the recent surge above 1.6500 to stall out at any moment. A closer look at the daily chart is quite revealing, with the market showing some strong internal resistance between 1.6665 and 1.6745 (former shoulder resistance of major h&s top). As such, we recommend looking to fade upside extensions into this area in favor of some bearish resumption. Look for a break back below 1.6485 to reaffirm outlook.
Jamie: After trading to a high just below 1.6700 (the high was made close to the 61.8% extension of the 1.5707-1.6404 advance), Cable has plunged. Former supports are now resistance at 1.6484, 1.6530, and 1.6607. The decline could be a series of 1st and 2nd waves, part of a leading diagonal, or a 3 wave correction. Price action since 1.6750 could also be in the mold of a triangle. There are many possible counts right now but most point lower from here. 1.6450 short was triggered this week. Move risk to 1.6600.
AUSTRALIAN DOLLAR / US DOLLAR
Joel: Despite overbought readings on both the daily and weekly charts, the pair remains very well bid with the market continuing to surge to fresh 2009 highs on a daily basis (0.9330 on Wednesday). Next resistance comes in by 0.9350, which represents a weekly high from August 2008. A break above 0.9350 will then expose an eventual retest of the critical 2008 highs by 0.9850. Intraday dips should continue to be well supported ahead of 0.9100, with only a break back below this figure to threaten the bullish structure.
Jamie: The AUDUSD reversal off of channel resistance (albeit unorthodox channel resistance) combined with momentum considerations (overbought + divergent) on multiple times frames put the pair at risk of at least a setback if not an outright reversal. Coming under .9181 would confirm as much.
NEW ZEALAND / US DOLLAR
Joel: Despite overbought readings on both the daily and weekly charts, the pair remains very well bid with the market continuing to surge to fresh 2009 highs on a daily basis (0.7635 on Wednesday). Next key resistance comes in by 0.7765, which represents a weekly high from July 2008. A break above 0.7765 will then expose an eventual retest of the critical 2008 highs by 0.8215. Intraday dips should continue to be well supported ahead of 0.7400, with only a break back below 0.7350 to threaten the bullish structure. The 10-Day SMA (0.7480) has been very supportive throughout much of the up-trend and bears would need to see a close below this level at a minimum to start to think about the potential bearish reversal and break back under 0.7350. Our model is short from earlier in the week at 0.7510 but the trade has been underwater for most of the time since inception.
Jamie: On the daily, the NZDUSD has tested (multiple times) and failed at a line extended from the 8/14 and 8/23 highs. In assessing the wave count, the rally from .7076 looks to be the final subdivision (wave 5 of c of Y). Since the high at .7640, the pair has marked time. A drop below the support line extended from .7250 and .7350 would be the first sign that a top is in place.
US DOLLAR / JAPANESE YEN
Joel: Our shift to a bullish outlook on Wednesday (based on 10/20-Day SMA positive cross) has paid off, with the market breaking the recent consolidation and accelerating through the 50-Day SMA and Upper Bollinger. Next key resistance comes in at 92.55 (21Sep high) which also coincides with the Ichimoku cloud bottom. Any pullbacks are now expected to be well supported ahead of 90.00. Weekly studies also confirm and show the formation of a base by 88.00.
Jamie: Either a triangle or complex correction is underway since December 2008. The next leg should be up towards 101.50 (maybe even above). Since the low at 88.00, a series of 1st and 2nd waves is visible. If this count is correct, then an exceptionally strong USDJPY rally is underway now. Move risk on the long to 91.20.
US DOLLAR / CANADIAN DOLLAR
Joel: Price action has been most encouraging for bulls of late with the market surging on Tuesday to trigger a very non-classical double bottom formation that now projects initial upside over the coming sessions into the mid-1.0600’s. Our overall outlook for the pair is constructive and we look for significant upside over the coming weeks. A closer look at the weekly chart shows the formation of a bullish hammer, followed by some encouraging price action in the latest week, after taking out the previous weekly high to end a sequence of consecutive weekly lower tops. Look for setbacks to now be very well supported ahead of 1.0265, with a higher low now ideally sought out by 1.0380, to be confirmed on a break back above 1.0585.
Jamie: The USDCAD may have made a significant low. The rally from 1.0200 is either a series of 1st and 2nd waves of a bull or a 3 wave correction within the bear. If the latter, then one more low would complete the larger decline from 1.3068. 1.0375 ideally holds. One reason to suspect that the advance from the low is actually the beginning of a larger uptrend is the severe overbought reading registered on the 20th. Severe overbought/oversold readings tend to ‘announce’ a new trend.
US DOLLAR / SWISS FRANC
Joel: Fresh 2009 lows just shy of critical support by parity. However, the overall trend remains intensely bearish and we would expect to see the psychological barrier taken out over the near-term. It is worth noting that daily studies are looking stretched and any additional weakness below 1.0000 should therefore be limited. For now, it is important that the market break back above 1.0355 to relive the downside pressure and potentially open some medium-term corrective strength.
Jamie: So far, 1.0030 is the low. For months, I’ve cited 1.0037 as a potential reversal level (100% extension). With consolidation above this level, now is no time to abandon the bullish camp. Additional weakness is possible with price below 1.0126 (above there signals reversal). Keep an eye on the ii-iv line – a rally above there would be the earliest reversal warning.
EURO / JAPANESE YEN
Joel: Any attempts to top out over the past several days have been met with solid buying into the close to instead result in some bullish consolidation now confirmed following Wednesday’s upside break. The key level to watch above comes in by 139.00 which coincides with some recent range highs over the past few months (see 5June/7Aug highs). However, any additional gains should be limited from there, with daily studies showing overbought after the RSI has crossed above 70. Near-term support comes in by 136.25, with a break back below this level to confirm exhausted outlook.
Jamie: We’ve focused on the bullish triangle for weeks and the EURJPY is threatening triangle resistance now. “A B wave triangle is complete at 129 and expectations are for a C wave rally that carries the EURJPY to the mid 140s (at least). Measured objectives are 144.73 and 154.44. Supports are 134.70, 135.50, and 136.10.”
BRITISH POUND / JAPANESE YEN
Joel: The daily RSI has crossed above 70 and although the market has been very well bid of late, we view the current moves as overextended and warning of a sharp pullback. The cross has tested the 100-Day SMA just shy of 153.00, and we do not foresee a close above this level. There is also some solid resistance just over 153.00 from September that is expected to stall the current surge. Conservative players can look to re-establish short positions on a break back below 150.00, while aggressive bears may want to sell an overshoot towards 154.00.
Jamie: After trading to former daily highs in September at 153.31, the GPBJPY has backed off considerably. 5 waves are clear from the 139.68 low so one would expect to find support in the former 4th wave, which is 147-149.40. Given the USDJPY pattern (along with the EURJPY), the decline underway now may just be a correction.
EURO / BRITISH POUND
Joel: A medium-term lower top now appears to be firmly in place by 0.9410, with the market showing some very good follow through from the previous bearish outside week. There is still plenty of room for deeper setbacks ahead, with next key support expected to be tested by some former resistance from August by 0.8835. Any rallies should now be well capped ahead of 0.9200.
Jamie: The EURGBP has held at the confluence of the 38.2% retracement of wave 3 / Elliott channel support / previous 4th wave extreme. Today’s advance appears to have put in the larger 4th wave low so favor a move to a new high. Short term support is .9135/55. Deeper support would be .9115 and .9075.
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