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Euro and Aussie Topping?

By , Sr. Technical Strategist
01 November 2007 10:46 GMT

11-01-07techs1

11-01-07techs2

Commentary:  The appearance of 5 waves up from 1.4125 along with this morning’s decline suggest that a top may be in place at 1.4503.  1.4500 is an important psychological level.  At the very least, a return to short term support at 1.4374 is expected, but this is likely a more significant top that will see a return to 1.4125 (4th wave of 2 larger degrees).  Evidence that this could be a more significant top includes the fact that the EURUSD just rallied 7 days in a row (this is rare…and previous instances indicated tops of at least a few figures), and overbought/ divergent daily RSI.  Still, there is no sign of a 5 wave decline yet so be careful if attempting to short.
   
Strategy:  Exit bullish position

11-01-07techs3

Commentary:  The USDJPY has reached the level that we felt would offer resistance and a top.  The levels in question are the 100% extension of 113.24-115.04/113.76 at 115.56, the 50% retrace of 117.93-113.24 at the same level, and the former 4th wave at 115.72.  Today’s high (to this point) is at 115.73 so we do expect a top and reversal soon.  The next level of potential resistance is the 61.8% retrace at 116.14.  Coming under 115.18 instills confidence in the bearish outlook.
   
Strategy: Bearish now, against 117.10, target below 111.59

11-01-07techs4

Commentary: We continue to focus on the weekly bullish channel as the short term structure is unclear.  Various resistance lines are clustered around 2.1000 and 2.1100.  The larger bullish trend is strong as long as price is above 2.0258.  Short term support is at an intraday reaction low from yesterday at 2.0689.     


Strategy: Flat

11-01-07techs5

Commentary: We continue to focus on the weekly bullish channel as the short term structure is unclear.  Various resistance lines are clustered around 2.1000 and 2.1100.  The larger bullish trend is strong as long as price is above 2.0258.  Short term support is at an intraday reaction low from yesterday at 2.0689.     


Strategy: Flat

11-01-07techs6

Commentary:  “The sentiment indicators that we follow (COT in particular) argue for a bottom to form now (but this has been the case for a while).  When a market is extending for some time, we use a trick to try to attempt to identify when a market is likely to turn.  Extended impulses will end after either 9 waves, 13 waves, 17 waves, etc (these are all derivations of 5 waves…..5 + 4, 5 + 4 + 4, 5 + 4 + 4 + 4).  The current decline is likely wave 13, which should end with one more low (below .9511).  Once a low is registered, a small 5 wave rally will serve as our alert to get bullish.”  The USDCAD is getting very close to a bottom….a new low (below .9413) would satisfy minimum expectations for the decline.

Strategy: Flat

11-01-07techs7

Commentary:  The Aussie looks like it to is close to a turn.  The rally from .7673 is in its 5th wave (which is from .8750).  Similarly, the rally from .8750 appears to be in its 5th wave (so we have a 5th of a 5th).  A slight new high (above .9342) is not out of the question but the next large move is likely to be down to at least .8750. 


Strategy: Flat

11-01-07techs8

Commentary: Unless the Kiwi rally is ending as a truncated 5th, we expect price to exceed .7738 soon and probably .7785 before a deeper correction unfolds.  This would make 5 waves up from .6639…which completes large wave 1 in a new 5 wave bull cycle.  A deep setback would then be expected to at least .7365 (likely lower) before wave 3 higher unfolds.    
 
Strategy:  Flat

11-01-07techs9

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01 November 2007 10:46 GMT