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Euro Crosses Bullish but May Consolidate Near Term

Tuesday, 05 August 2008 16:17:41 GMT

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Written by Jamie Saettele, Senior Currency Strategist

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Since the April high (.8096), the EURGBP has been stuck in a triangle.  Triangles are continuation patterns, so we expect a break to the upside before a major top forms.  Those willing to position for a bullish break should keep risk to .7766.




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The bullish EURCHF count is tracking well.  “The 1.5326-1.6376 rally is in 5 waves, therefore expectations are for a similar 5 wave rally to succeed the corrective decline from 1.6376.  Therefore, it is possible that a low is in place.  A bullish bias is warranted.”  Expect a push through 1.6376 soon.




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Longer term, there is no change to the call for a push through 1.6324.  Near term, the rally from 1.5278 is not clearly impulsive and it is possible that price action since the March top at 1.6324 is unfolding as a triangle.  Expect the range to tighten going forward if a triangle is underway.  As mentioned, a thrust through 1.6324 is still expected; the triangle just delays the move.




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We showed the long term monthly chart last week, mentioning that “one possibility is that a triangle is complete from the August 1992 top and that the next move is a bullish break from the triangle.  If this is correct, then the EURAUD is forming a major low now.  1.5922 would be critical to this long term bullish bias.”  The EURAUD vaulted higher last week in a 3rd wave within what will be a 5 wave impulse from 1.6047 (and even a larger impulse from 1.5922).  Expect a break above 1.7426 in the next few weeks.  Potential support is at 1.6690/1.6760.
 



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There is no change to our long-standing bullish bias.  The advance from the December 2005 low to the July 2006 high was in 5 waves and the decline that followed was in 3 waves.  The EURNZD has exceeded the July 2006 high and the next long term objective is 2.33 (161.8% extension).  Long term traders should keep risk at 2.0477 and sit tight with this trend since upside potential is significant.  The recent break of the 10 year trendline is unquestionably bullish.




TREND ANALYSIS is based on a rolling pivot model.  LONG TERM TREND is determined by the last 3 months of price data (high, low, close).  SHORT TERM TREND is determined by the last 4 weeks of price data (high, low, close).  R3, R2, R1, PL, PH, S1, S2, and S3 are provided to aid in identifying entries and exits.  These are objective measures and our subjective analysis (STRATEGY) may differ. 

SCHEDULE
Monday: EURGBP, EURCHF, EURCAD, EURAUD, EURNZD
Tuesday: EURJPY, GBPJPY, CHFJPY, CADJPY, AUDJPY, NZDJPY
Wednesday: GBPCHF, GBPCAD, GBPAUD, GBPNZD
Thursday: AUDCHF, AUDCAD, AUDNZD


Tell us what you think about this report: contact the strategist about the article at jsaettele@dailyfx.com
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