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Euro / US Dollar
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| Joel: A multi-day bearish consolidation has been broken, and more importantly, the market has finally broken below the 200-Day SMA to highlight what we contend to be a significant shift in the broader structure, which now favors additional USD strength over the medium-term. The consolidation high-lows had been roughly defined between 1.4200-1.4600, and we therefore look for the current down-leg to extend into the 1.3800’s over the coming days. However, given the extend of the latest drop, we would not rule out the possibility for a short-term corrective bounce towards 1.4250 before considering bear trend resumption. |
| Jamie: Near term, a small 4th wave correction may be complete. Additional resistance would be at 14250. Staying below 14334 keeps the trend pointed lower. Keep in mind the alternate labeling, which is decidedly more bearish. Under the alt., the near term advance would be a smaller 2nd wave and the next drop would be a third of a third, which would probably reach the mid 13000s quickly next week. An extended fifth wave is also possible. My point is to refrain from taking profit on a drop to a new low. |
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British Pound / US Dollar
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| Joel: Gains have stalled out by 1.6455, with the market looking like it is now ready for bear trend resumption after the formation of a bearish gravestone doji-like candle a few days back. Key short-term support comes in by 1.6125 and we will look for a break below this level to reaffirm our bearish outlook and accelerate declines back towards critical medium-term support by 1.5700 over the coming days. For now, any intraday rallies should be well capped ahead of 1.6370. |
| Jamie: There are 5 waves down from 16464 and the rally from 16123 proved corrective. Bears are favored against 16289. A short term target is 15950 although the ultimate objective is below 15700. |
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Australian Dollar / US Dollar
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| Joel: Despite the latest sharp rebound above 0.9300, we retain a strong bearish bias and look for the market to roll over at current levels, in favor of eventual downside acceleration below 0.8735 over the coming weeks. A major head & shoulders topping pattern was triggered back in mid-December that projects weakness into the 0.8400’s, and only back above 0.9410 would negate our outlook and give reason for pause. Wednesday’s break below 0.9170 helps to confirm bias and should accelerate declines towards next key support by 0.8900. |
| Jamie: The dominate pattern remains the decline from just above 9400, which counts well as an a-b-c decline with wave b as a triangle. This pattern suggests that the larger trend is still up, which is at odds with other USD bullish counts. One possibility is that the 3 wave decline is wave A of triangle or flat with the succeeding rally as wave B…or even the first wave of a leading diagonal. Time will tell. |
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New Zealand Dollar / US Dollar
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| Joel: We have seen a notable shift in the trend over the past several weeks, with the market stalling out by 0.7635 back in October and reversing to put in a series of consecutive lower tops and lower lows since. A lower top is now sought out by the recent highs at 0.7430, ahead of some fresh weakness back down to 0.7000 over the coming sessions. The latest break back under 0.7285 helps to confirm bearish outlook. Any intraday day rallies towards 0.7300 should now be aggressively sold into. |
| Jamie: The NZDUSD decline from 7446 extended into 5 waves, therefore I am bearish on pullbacks. 7180-7240 is a resistance zone. Coming under 6672 would shift focus to 6600. |
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US Dollar / Japanese Yen
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| Joel: Despite the latest bounce to 93.75, the pair still remains confined to a very strong downtrend off the April 2009 highs and any rallies should be limited. Falling trend-line resistance off of the April 2009 highs has been adhered to on the latest rally and a medium-term lower top could be in the process of carving below 94.00. Recent price action seems to be suggesting that we could be headed for underlying bear trend resumption after the market triggered a double top, with the break below neckline support at 91.25. This now projects a measured move downside extension towards 89.00 over the coming session. Only back above 92.00 would give reason for concern and delay. |
| Jamie: The USDJPY low in November has that ‘look’ and feel of an important bottom. The low was in a spike fashion and occurred at the midline of a well defined multiyear channel. Structurally, the decline from the 2007 high (12420) may be a diagonal. Sharp rallies tend to follow diagonals. The rally from 8481 is a 3 wave correction rather than the first 3 waves of an impulse. The decline from 9380 is unfolding in a corrective manner as well. Favor additional weakness with price below 9189. The next potential support is 8892. |
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US Dollar / Canadian Dollar
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| Joel: As had been expected, setbacks were very well supported ahead of 1.0200 with the market finally surging back above 1.0400 on Wednesday. From here, we continue to see additional upside with gains now seen towards 1.0700 over the coming days. Any intraday pullbacks should be well supported into the mid-1.0300’s. |
| Jamie: The USDCAD may be nearing a short term top. The rally is in 5 waves and the last leg up may be a thrust from a triangle. Triangles occur in 4th waves, therefore the rally from the triangle is a 5th wave. A setback next week would present a bullish opportunity. 10530-10430 is a support zone. Looking out a bit further, expectations are for the USDCAD to shoot through 10875 in a 3rd wave. |
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US Dollar / Swiss Franc
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| Joel: The market is in the process of carving out a major base since dipping down below parity in November 2009. Look for a higher low by 1.0130, to be confirmed on a break back above 1.0500 over the coming sessions. Above 1.0500 will then open a fresh upside extension back towards next key resistance in the 1.0700 area. Only back under 1.0130 would delay outlook and give reason for pause. Bulls should look for opportunities to buy on dips into the 1.0250-1.0300 area. |
| Jamie: The USDCHF has extended its rally from the 61.8% retracement and conditions remain bullish. 10511 is expected to give way to a 3rd wave, and a soft target is 11026/91. This is the former 4th wave extreme / 161.8% extension of wave 1. |
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Euro / Japanese Yen
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| Joel: Setbacks have now finally reached the lower end of a multi-week range dating back to March of 2009 and it will be interesting to see if the cross can respect the range bottom and bounce, or finally break below the medium-term platform to expose a more significant drop back towards the 115.00 area. Short-term technical studies would however suggest that a bounce out from current levels is the more likely scenario with daily studies looking stretched. |
| Jamie: The EURJPY decline below 12686 confirms the fan principle that I had written about in December (fan principle – the third trendline break confirms the end of the correction) and therefore strongly suggests that the larger downtrend (that began in 2008) has resumed. It is best to short pullbacks in the resistance zone of 12840-12960. Price should remains below 13150. 12000 is the next level of potentially strong support. |
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British Pound / Japanese Yen
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| Joel: Some inter-day rising trend-line support has been broken which could now suggest that the market is prepping for a more significant drop back into the lower 140.00’s over the coming days. However, we retain no strong bias at current levels, with the market just as easily seen racing higher towards 150.00. Daily studies confirm neutral outlook. |
| Jamie: Big picture, it remains my contention that the rally to 16310 completed a 4th wave correction and that the GBPJPY will eventually decline to a new low beneath 11879. What confounds me at this point is whether or not wave ii of 5 is complete at 15330. The decline from there counts better as a b wave which favors the idea that 15330 will be exceeded in order to complete a flat. It is also possible that a triangle is underway in wave b. I am not comfortable enough with this pattern to trade it but instinct tells me to be more bearish given the EURJPY drop below 12686. Coming under 13925 would strongly suggest that wave .iii of v is underway. |
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Euro / British Pound
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| Joel: The market has come under intense pressure of late with the latest sharp drop now exposing a potential retest of critical medium-term support by the 2009 lows at 0.8400. However, with daily studies now looking quite stretched, we would not rule out the prospects for a short-term bounce back towards the 0.8850-0.8900 area before some renewed selling. The 78.6% fib retracement off of the major June09-October09 move comes in by 0.8620, and any drops into this area over the near-term should generate some strong buy interest. |
| Jamie: The rebound from 8649 should prove corrective and resistance is at 8841 (50% retracement). This level intersects with parallel channel resistance on the 28th. Favor selling strength near that level for a drop below 8649. 8574 is a measured objective and potential support. Remember, if a flat is underway from the December 2008 high, then the decline would continue below 8399. The bearish bias is valid against 9033. |
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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.
