daily technicals

USDCHF Plummets - Decline Likely to Extend

Monday, 02 July 2007 12:46:16 GMT  |  Jamie Saettele, Technical Currency Strategist

• Euro Tests 1.3600
• Japanese Yen Testing Trendline
• British Pound Tests 2.0131
• Swiss Franc In 3rd Wave
• Canadian Dollar Significant Low in Place?
• Australian Dollar Extending- Objective at .8643
• New Zealand Dollar Extending Towards .8000

Commentary:  As mentioned last week - “The push through 1.3437 signals that wave iii, of a 5 wave rally that began at 1.3261, is underway.  An objective is 1.3656, the 161.8% extension of 1.3261-1.3437/1.3371.  While we are looking for a test or a marginal break of 1.3680, we are expecting the next big move to be down towards the mid 1.2000’s.”  The pair is pressing against 1.3600 so there is no reason to change our outlook for a test of 1.3680.  Expect some consolidation in wave 4 today or tomorrow before a rally to a new high (above 1.3680).  The mentioned reversal is expected though.  
   
Strategy:  Bullish, against 1.3414, targeting 1.3656

Commentary:  We wrote Friday that “a potential end for this short term rally is 123.72/90, which is the 78.6% of 124.13-122.23/123.72 and the 100% extension of 122.23-123.36/122.77 (rally could reverse prior).  A larger complex correction is playing out from 124.13 (W-X-Y).  After the reversal, we are looking for a drop below 122.23.”  The pair reversed from 123.55 and we are looking for a decline to at least 124.13-122.23/123.55 at 121.65.  Potential trendline support is at 122.25.

Strategy: Flat

Commentary:  We wrote yesterday that “wave 5 could extend higher but its not a high probability trade.  Cable has lagged behind and we will look for a small 5 wave decline in order to get longer term bearish for a return to below 1.9000.”  Cable has tested the previous high at 2.0130 (today at 2.0128).  A rally through 2.0130 would satisfy minimum upside expectations.  The 5th wave of the entire rally from 1.7046 is unfolding as an ending diagonal (from 1.8515).  The upper resistance line for the diagonal is at 2.0283 today.  A small 5 wave decline (after a break above 2.0131) will signal that it is time to get bearish.

Strategy: None

Commentary:  We wrote last week that “the USDCHF structure is now longer term bearish and suggests that the CHF will outperform ther currencies (especially the GBP).”  A wave 3 down began at 1.2341 and we are looking for this decline to extend to the 161.8% of 1.2476-1.2258 /1.2341 at 1.1988.  Remaining below 1.2258 keeps us looking lower.  

Strategy:  None

Commentary:  The reversal with long term bullish implications is underway as there are 5 waves up from the 1.0470 low.  “The decline under 1.0548 satisfies minimum expectations.  Since the USDCAD is in a 5th wave, we do not see this as a breakout opportunity.  We are showing the weekly chart with the long term outlook (2 to 3 years).”  A second wave is either close to complete near current price or will end closer to the 61.8% of 1.0470-1.0656 at 1.0541.
 
Strategy: Bullish, against 1.0470, target TBD

Commentary:  The Aussie is extending higher.  The rally from .8355 looks like a 3rd wave in a 5 wave rally from .8332.  A measured objective is at the 161.8% extension of .8332-.8510/.8355 at .8643.  The structure is bullish as long as price remains above .8470.

Strategy: None

Commentary: No change in Kiwi.  “Looking at the rally from .7237, it is possible that Kiwi is just now entering a third of a third wave that could see the pair test .7848-.8093 in the next couple of weeks (this is the 100%-161.8% of .7237-.7637/.7452).”  Remaining above .7686 keeps the structure bullish. 
  
Strategy:  Bullish now (breakout), against .7686, target TBD (above .8000)

*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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