Yen and Dollar Continue to Weaken but Key Levels are Well-Defined

EURUSD – The EURUSD has taken out resistance from the March 2005 high as well as the 1.3500 figure.  The next level of chart resistance is the 2004 high at 1.3666.  There is no change in the call for a longer term top due to the 7 wave rally (which is a double zigzag….two zigzags connected with an X wave – labeled W-X-Y) from 1.1638.  A break of 1.3666 would expose 1.3799, which is where wave W (1.1638-1.2979) would equal wave Y (beginning at 1.2458).  Near term, the pair has run into resistance from a 2 month upward sloping channel line.  Some consolidation in a 4th wave is expected support at 1.3486.  The near term bull case is strong above 1.3453.  Coming under 1.3453 is the first sign that a more significant top is in place.

USDJPY – The USDJPY reversed midday Friday and trades at a month and half high after taking out resistance from the previous week at 119.50.  A daily close above potential trendline resistance drawn off of the 2/12 and 2/22 highs would increase confidence in a near term bullish outlook.  A break above 120.00 exposes the 78.6% of 122.17-115.14 at 120.67.  Today’s low at 118.96 is support.   

GBPUSD – Cable has traded to a new high for 2007 this morning and focus remains on the psychological 2.0000 figure.  Given the presence of 2.0000 along with the possibility that 5 waves are complete from 1.9589, the risk of a reversal is high.  Some consolidation/pullback is expected as oscillators are overbought on both daily and intraday charts.  1.9781 is initial support.  Coming under short term trendline support, just above 1.9700, indicates additional bearish potential.

USDCHF – The break below short term trendline support warrants a short term bearish bias as long as price remains below 1.2187.  However, the longer term turn wave structure supports a reversal (higher) as long as 1.2027 remains solid.  A rally above 1.2281 would give credence to this view and suggest that an important low is in place at 1.2027. 

USDCAD – The USDCAD continues to break down following the break of parallel channel support.  The next potential support level is the 11/28/06 low of 1.1286.  Daily RSI has reached oversold territory for the first time since April of 2006, so a bounce towards near term resistance at 1.1411 may be in order.  The bearish case is strong below 1.1487.

AUDUSD – The AUDUSD continues to rally and briefly traded above the 1990 high of .8351 today.  Daily oscillators (CCI and RSI) are overbought and divergent with recent highs.  Also, the break that occurred at .8000 was from a triangle and triangle breakouts are terminal (meaning that they are eventually retraced).  The daily chart below shows the triangle (a-b-c-d-e) and the 5 wave rally that has ensued and RSI.  With daily oscillator action, an extreme risk reversal rate (1 month 25 delta options) and the Aussie at former longer term resistance, we are looking for a reversal.  Coming under .8232 signals that we are on the right track. 

NZDUSD – Kiwi briefly traded above .7400 today, just 50 pips from the March 2005 high at .7463.  A Fibonacci turn date was Friday – but the longer term nature of the analysis allows for a deviation of 4 days.  Daily RSI is overbought and divergent as well.  Coming under .7313 would be the first sign that a top is in place.