daily technicals

USDJPY Potential Head and Shoulders Opportunity

Monday, 23 July 2007 12:31:38 GMT  |  Jamie Saettele, Technical Currency Strategist

• Euro Rally is Wave b
• Japanese Yen Head and Shoulders
• British Pound Pressing Against Trendline
• Swiss Franc Correction
• Canadian Dollar Bearish (USDCAD Bullish) Pivot at 1.0500
• Australian Dollar Up 11 Consecutive Days
• New Zealand Dollar Objectives at .8049 and .8099

Commentary:  The EURUSD briefly traded above 1.3832 today, hitting 1.3843 before pulling back to the 1.3800 figure.  Because the rally from 1.3752 is in 3 waves, the ascent is most likely wave b within a flat correction.  Look for wave c to come under 1.3752.  The bigger picture remains bullish but risk of a more severe pullback is also possible as daily RSI remains above 70. 
   
Strategy:  Flat

Commentary:  The break under 120.97 indicates additional bearish potential.  Intraday charts show a head and shoulders pattern forming from the beginning of June as well.  The pattern is confirmed on a break below 120.75.  The next level of support would be the 50% fibo of 115.14-124.13 at 119.64.  This level is defended by the 5/11 low at 119.46.
 
Strategy: Flat

Commentary: With 5 waves up from 2.0056 and with Cable pressing against the resistance line drawn off of the 6/12 and 7/3 highs, the risk of a reversal is high.  We are looking for a correction to breing price back to at least 2.0468 and possibly parallel channel support (near 2.0375 today but increases 30 pips/day).  The structure is bullish as long as price is above 2.0203. 

Strategy: Flat

Commentary:  Given the strong rally from 1.1980, it is likely that the USDCHF is tracing out a more complex correction from the 7/18 low at 1.1960.  A push through 1.2064 wouls satisfy minimum expectations so be wary of getting long on a break through that level.  If 1.2064 gives way, then former support at 1.2091 becomes potential resistance.  If a triangle is unfolding from the low at 1.1960, then the USDCHF will range between 1.1960 and 1.2064 before a break lower.

Strategy:  Flat

Commentary:  We wrote Friday that “an inverse head and shoulders pattern may be playing out in the short term as well.  A rally through 1.0477 increases confidence in the bullish outlook.”   Still, we can not identify a clean 5 wave rally from the low to signal with confidence that the trend has indeed changed from bearish to bullish.  1.0400 remains key to the bullish case.

Strategy: Remain bullish, against 1.0400, target TBD

Commentary:  The AUDUSD has closed up 11 consecutive days (today would be the 12th), but the rally from .8707 is choppy (possible a diagonal), which warns that upside momentum is waning.  .8840 is a measured objective and the high this morning is at .8842.  Risk of a reversal is high.

Strategy: Flat

Commentary: Kiwi continues to rocket higher and the next level of potential resistance is the 138.2% of .7463-.5928 at .8049.  The 161.8% extensions of .7237-.7637/.7452 is at .8099 and is also potential resistance.  Although Kiwi has extended, the form remains the same and we are looking for a 4th wave (within the 5 wave rally from .7237) to eventually unfold before a 5th wave makes a new high.  The structure remains bullish.
 
Strategy:  Flat

*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. 

 

Resources

• free demo account
• forex courses
• open an account
• real time news
• free webinars