Joel: The latest break below 1.4000 now exposes our measured move objective target by 1.3800 further down, but at present, we recommend that bears proceed with caution as daily studies are now oversold with the RSI below 30. Key short-term resistance comes in by 1.4050 and a break back above this level will confirm short-term basing and open the door for additional corrective upside before considering bear trend resumption. However, inability to clear 1.4050 will keep the pressure on the downside and open a 1.3800 retest further down.
Jamie: Bigger picture, “staying below 14583 keeps the larger trend pointed lower in either a 3rd wave or C wave. If a C wave, then the decline should extend to the 13650-13750 area. If a 3rd wave, then the decline likely extends closer to 13000.” Stay bearish against 14060. Also, the confluence of resistance lines can be used as a reference point (zone).
British Pound / US Dollar
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 daily gravestone doji-like candle in the previous week. Key short-term support comes in by 1.6085 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 1.6300.
Jamie: Keep apprised of the diamond top that has been forming since June 2009. Near term, I am unsure of the pattern development. The GBPUSD is breaking down so momentum favors bears below 16184. Former supports between 16080 and 16110 are now resistance.
Australian Dollar / US Dollar
Joel: Despite the recent rebound above 0.9300, we retain a strong bearish bias and look for the market to continue to roll over at current levels, in favor of eventual downside acceleration below 0.8735 over the coming days. 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. Next short-term support comes in by 0.8800 and a break below will likely open fresh downside extension towards 0.8735. For now, look for any intraday rallies to be well capped in the 0.9100-0.9150 area.
Jamie: The AUDUSD decline from 9334 is in 5 waves (wave 5 might be a rare expanding diagonal). A corrective advance appears complete at 9055. Although shallow, the rally reversed in the area of the previous 4th wave. Favor the downside against 9055.
New Zealand Dollar / US Dollar
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 0.7440, ahead of some continued weakness to 0.6975 (23Dec low) over the coming sessions. The latest break back under 0.7090 helps to confirm bearish outlook. Any intraday day rallies towards 0.7200 should now be aggressively sold.
Jamie: The NZDUSD is in the same situation as the AUDUSD. There are 5 waves down from 7446 and at this point, I am treating the advance to 7144 as a completed correction. Favor the downside against there.
US Dollar / Japanese Yen
Joel: The measured move objective off of the double top triggered on the break below neckline support at 91.25 has now been reached and although the overall trend appears to be grossly bearish at present, shorter-term technicals are starting to look a little stretched and could potentially be warning of a more significant upside reversal over the coming sessions. Key short-term resistance comes in by 90.55 and look for a break above this level to confirm basing and open a push back towards 92.00. Back under 89.00 negates and opens fresh drop.
Jamie: The rally from 8481 is a 3 wave correction rather than the first 3 waves of an impulse. The decline from 9380 has unfolded in a corrective manner as well. The 8840-8890 level has been an area that I’ve suggested could be a support zone…but the USDJPY has yet to get there. What’s more, the recent advance is sharp and unfolding in an impulsive manner. Price is breaking above a short term resistance line now and focus is on 9190. Price pattern is constructive above 8955.
US Dollar / Canadian Dollar
Joel: The latest sharp rally has so far stalled out just ahead of our initial objective by 1.0700 with the market finding some resistance ahead of the December 1.0745 highs. Daily studies still however show room to run and we look for additional upside over the coming sessions towards 1.0865 before considering the potential for a short-term pullback. We continue to retain a very strong bullish bias in the pair and believe that the market is in the process of carving a longer-term base. Look for any dips to now be well supported in the 1.0400-1.0500 area.
Jamie: Confidence in the extremely bullish count is low because the correction (what would be the 2nd wave) failed to reach the area of the former 4th wave. There are 2 ways to look at this. Either the correction is not yet complete or the shallowness of the correction indicates that the pattern is extraordinary bullish. Given the counts in the AUDUSD and NZDUSD, I favor the latter interpretation.
US Dollar / Swiss Franc
Joel: The market is in the process of carving out a major base since dipping down below parity in November 2009. A higher low by 1.0130 has now been confirmed following the latest break above 1.0500, and this should now open a fresh upside extension back towards next key resistance in the 1.0700 area over the coming sessions. Only back under 1.0365 would delay outlook and give reason for pause. Bulls should look for opportunities to buy on dips into the 1.0400 area.
Jamie: Like the EURUSD, it is unclear if a 3rd wave is underway (from 10366) or if the rally from 10128 is the first wave of the next impulse. Staying above 10366 keeps the immediate trend pointed higher.
Euro / Japanese Yen
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. Look for a break back above 127.10 to confirm.
Jamie: Bigger picture, 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. Near term, continue to favor the downside against 12713 but beware of potential support from 12437 (April low). A rally above 12713 would signal that a larger corrective move is underway and focus would then shift to 12841. Keep in mind that lows in JPY crosses tend to occur in a ‘spike’ fashion (watch for exceptionally large daily ranges).
British Pound / Japanese Yen
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 towards 140.00 over the coming sessions. 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. Key short-term levels to watch above and below come in by 147.30 and 143.65 respectively.
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.” Near term, favor the downside against 14728. A break below 14362 / support line would shift focus to 14200 (12/9/09 low).
Euro / British Pound
Joel: While our core view has been intensely bearish for some time now, the latest sharp pullbacks leave us sidelined and looking to re-establish fresh short positions into rallies rather than at current levels. Daily studies are now oversold and warn of a corrective rally and we would recommend looking to sell into the 0.8900 area where a fresh medium-term lower top is sought out ahead of the next downside extension towards major support by 0.8400.
Jamie: The EURGBP decline has been textbook Elliott. We’ve favored weakness, noting that the decline from 9158 is unfolding as an impulse. Additional weakness is likely but not before a small 4th wave consolidation/correction. Resistance is the former 4th wave extreme at 8800.
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