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The week begins with the Australian and New Zealand dollars testing resistance.  Breaks above resistance could lead to large rallies to .75 and .65, respectively.

On Friday, I wrote that “the upper end of the triangle line is in the 1.29-12950 zone today and Monday and is resistance in the event of an advance.”  The EURUSD has entered this zone, although triangle resistance extends up to 1.30.  If the triangle interpretation is correct, then price will top before 1.3116.  The alternate, bullish scenario is valid as long as price is above 1.2652.  

The larger USDJPY trend is down so strength should be sold.  Evidence that favors a new low is the momentum extreme (RSI) at 90.86.  As I’ve mentioned many times before, price extremes (highs and lows) rarely correlate with momentum extremes.  Instead, price extremes occur with momentum divergence.  Support begins at 96.       

Cable is lagging the EURUSD.  Still, there is no structural change to the pattern.  “The GBPUSD is supported by a long term trendline that dates to 1985 (see purple line at bottom of chart).  I expect a larger bounce off of this line; regardless of the larger trend…the result would be a volatile range over the next several weeks before a break to a new low.”  The range to this point looks like the firs two legs of a triangle with price now at the lower end of the triangle.  A c wave rally could reach 1.62 + this week.

The USDCHF is testing a resistance line from late 2005 as well as a shorter term upward sloping resistance line.  These lines combined with overbought and divergent RSI on the weekly and daily should lead to a drop that lasts at least a number of weeks.

A wave 4 low may be in place for the USDCAD.  A line drawn off of highs from late 2007 / early 2008 has probided support ahead of 1.13, which is the 4th wave of one less degree as well as the 50% retracement of the rally from .9817 (low of wave 2).  If a low is in place, then price should remain above 1.16.

The AUDUSD drop below .6544 on Friday warned us of a potential end to wave b within an a-b-c advance from .6007.  A push through .7022 would confirm that wave c is underway towards the measured objective at .7508 (100% extension).

Kiwi is in a similar position (when compared to the AUDUSD).  The rally to .6037 is either wave a or i within a larger rally sequence.  Wave b or ii may be complete at .5742 although risk remains that the pair drops below .5742 before a solid base is in place that will lead to a larger rally.  As long as the NZDUSD holds above the short term support line, adoption of a bullish bias is warranted. 

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.