currency crosses

Euro Crosses: Corrective Rallies Will Offer Bearish Trades

Tuesday, 06 January 2009 22:19:05 GMT  |  Jamie Saettele, Senior Currency Strategist

-euro / British Pound significant reversal?
-EURCHF resistance begins at 1.5150/75
-EURNZD reversal from 2.50 beginning of year + weakness?

There are a number of technical factors that suggest a significant top is in place.  There are 5 waves up from January 2007 and the EURGBP reversed just ahead of parity.  The decline is probably in its early stages and a move back to the former 4th wave, which is not until .8192, is expected.  How long this takes is unclear to say the least.  Near term resistance is in the .9220-.93 zone. 

The decline from 1.5886 counts nicely as an impulse, therefore the larger trend has turned down.  The EURCHF is approaching initial Fibonacci resistance from the former 4th wave / 38.2% of 1.5886-1.4752 at 1.5150/75.  It is worth taking a short at the short side near there.

From the 2001 low to the 2007 low, the EURCAD traced out 5 waves up and 3 waves down.  Having already exceeded 1.6971, it is possible that a complex declining pattern of sorts is underway from 2.0564 (as shown with alternate labels).  But, the preferred bullish count is intact as long as price is above 1.4711.  Also, the pattern since the 1995 top has the look of an inverse head and shoulders continuation pattern (neckline broken last year).  

The decline from 2.1174 to 1.8487 was in 3 waves, which is corrective.  However, the advance from 1.8487 is also in 3 waves indicating that either a flat (3-3-5) is underway or a triangle (3-3-3-3-3) is underway.  In the case of a flat, the decline will end just below 1.8487 before the longer term uptrend resumes.  In the case of a triangle, the EURAUD would follow a path similar to the one shown on the chart.    

5 waves up from the July 2007 low at 1.7023 appear complete.  As such, a year + corrective decline is probably underway from 2.4858.  Short term resistance is 2.32.  Long term Fibonacci support does not begin until 2.1511.

 

 

Jamie Saettele writes Forex Technicals: The Day Ahead, Monday-Thursday (published at 6 pm EST), Daily Technicals every weekday morning (9 am EST), COT Analysis (published Monday mornings), and analysis of currency crosses throughout the week.  He is also the author of Sentiment in the Forex Market.

 

Contact at jsaettele@dailyfx.com

 

 

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