daily technicals

British Pound and Kiwi at Reversal Points

Monday, 18 June 2007 12:11:24 GMT  |  Jamie Saettele, Technical Currency Strategist

• Euro Breaks Above 1.3400
• Japanese Yen Small 4th Wave
• British Pound Right at Resistance
• Swiss Franc in C Leg of Correction
• Canadian Dollar Working Towards 1.0850
• Australian Dollar Bullish Above .8332
• New Zealand Dollar Reverses at 61.8%

Commentary:  The bounce from 1.3261 has been stronger than expected and looks impulsive, thus we see bullish potential.  Support is at today’s low of 1.3375 and potential resistance is 1.3441/90, which is the area bound by the 61.8% and 78.6% of 1.3552-1.3261.  The longer term bearish bias is intact as long as price remains below 1.3552.   
   
Strategy:  None

Commentary:  “It is our working assumption that the USDJPY is working higher in a C wave towards the 128.00 area over the next few months.  The 78.6% of 135.13-101.67, the 100% extension of 108.98-122.17/115.14, and the 100% extension of 101.67-121.39/108.98 are between 127.97 and 128.70.  In the short term, the USDJPY is tracing out a small 4th wave that should remain above 122.82.

Strategy:  Align with uptrend at 122.90, against 121.81, targeting 128.00

Commentary:  We wrote last week that “the decline from 1.9964 is a clean 5 wave affair and an a-b-c correction is unfolding from 1.9621.  This correction should be complete near 1.9814/33.  1.9814 is where wave c would equal wave a and 1.9833 is the 61.8% of 1.9964-1.9621.  Aggressive short term traders can look to trade the small c wave higher towards 1.9830 with 1.9655 as risk.  We are looking to get bearish on either a break below 1.9621 or a rally to 1.9814.”  We are bearish now, against 1.9964, targeting a break of 1.9621 and potentially much lower levels.     

Strategy:  Bearish now, against 1.9964, target TBD

Commentary:  The USDCHF reversed last week just before the 100% of 1.1993-1.2329/1.2145 at 1.2481.  We wrote last week that “since the USDCHF has stalled just below the 100% extension (1.2481), be wary of a pullback towards.  A small c wave is expected to bring price back to the former 4th wave at 1.2372.  This is a good point to either add to longs or initiate longs.”  The pair is just above this level.  The longer term bullish structure is intact above 1.2145 

Strategy:  Bullish now, against 1.2145, targeting 1.2500 and 1.2700 (add to position at 1.2372)

Commentary:  We still maintain that “the 4th wave correction of the 1.1825-1.0548 decline is underway.  The projected end for wave 4 is 1.0849-1.1036.  1.0849 seems more likely since that level intersects with channel resistance this week.”  Friday’s low at 1.0601 is the bottom of wave b within the larger wave 4.  Price is above the 21 day SMA for the first time since March 20th. 
 
Strategy: We are bullish now, against 1.0548, targeting 1.0800

Commentary:  Our assumption is that a correction ended at .8332, which is the 100% extension of .8476-.8365/.8447.   We wrote last week that  “once we see evidence of an impulse rally, we will get bullish against the swing low (which is .8332 now).  A rally through .8447 warrants bullish action.”  The rally fom last week’s low is is impulsive, and strongly indicates that at least one more 5 wave rally is expected with .8332 remaining intact.  Support should be strong at the 61.8% of .8332-.8451 at .8377.  We will look for a top following a rally through.8476.

Strategy: Bullish now, against .8332 target TBD

Commentary: From Friday: “The 5 wave decline from .7637 to .7465 suggests that at least one more leg lower will occur.  An irregular flat correction may be unfolding from .7465.  Potential reversal points are .7551 and .7571 (the 50% and 61.8% of .7637-.7465).  We are bearish from .7535 and targeting .7262, which is the 161.8% extension of .7637-.7465/.7540.  The 100% extension is at .7368 and may also be support so keep risk tight if price falls below .7400.  In summary, we are looking for a spike above .7540 before price reverses and heads lower.”  The high today was .7571 so our wave count is tracking nicely.  The bearish targets are revised to .7399 and .7293 (which are the 100% and 161.8% extensions of .7637-.7540/.7571.  

Strategy:  Bearish at .7535, against .7637, targeting .7262.

*JTREND is a proprietary calculation that uses recent highs, lows and closes to determine the trend.  JTRENDLT is the longer term trend and uses the last 4 weeks of price data.  JTRENDST is the shorter term trend and uses the last 5 days of price data.  An example is below.  Blue bars denote bullish trend and red bars denote bearish trend.  The chart below is the EURUSD weekly chart. 

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