daily technicals

US Dollar Bearish Potential Limited

Wednesday, 08 August 2007 12:08:41 GMT  |  Jamie Saettele, Technical Currency Strategist

• Euro Limited Bullish Potential
• Japanese Yen Working Towards 119.87
• British Pound  Reversal
• Swiss Franc 1.2000 is Key
• Canadian Dollar Could Test 1.0415
• Australian Dollar Near Term Bullish
• New Zealand Dollar Wave C Towards Fibo

Commentary:  The EURUSD strucutre has confused us somewhat.  The pair bounced just pips from below 1.3727.  Technically, wave 4 should not intersect with wave 1, but in highly leveraged markets (such as FX), an intraday intersection is ok.  With that in mind, wave 5 may be unfolding now, which will carry above 1.3838.  A rally through 1.3838 would complete 5 waves and expectations would then be for a return to the 1.3720 level.  Also, if wave 5 (from 1.3720) is to equal wave 1 (1.3608-1.3727), then a potential terminus for wave 5 is 1.3839 - very close to the wave 2 high of 1.3838.  In summary, look higher but near term bullish potential is limited.
   
Strategy:  Flat

Commentary:  As we have focused on, “larger wave 2 or B is expected to unfold from little if any below 117.18 and makes its way to the Fibo reversal zone of 119.83-121.47.”  The break above 119.09 indicates that the corrective wave is in its final leg towards 119.83-121.47.  Wave c of the correction (from 117.95) would equal wave a (117.17-119.09) at 119.87.  This level is reinforced by the 7/25 low at 119.79 (yellow circle).  In summary, look for strong resistance just ahead of 120.00. 
 
Strategy: Flat

Commentary: After spiking below 2.0179, Cable has embarked on an impressive rally.  This leaves the decline from 2.0461 as either wave b of a flat correction or wave C of a correction from 2.0651.  Both cases are bullish near term and favor a rally through 2.0461.  We’ll wait until 2.0461 to be exceeded before deciding which count to favor.  The alternate count is shown in red.  

Strategy: Flip to bullish, against 2.0155, target above 2.0461

Commentary:  We maintain that the decline below 1.1877 “is the beginning of a thrust from a triangle.  A measured objective for the end of the terminal thrust is 1.1364 (the 161.8% extension of 1.2468-1.1960/1.2165).  The structure is bearish as long as price is below 1.2165.” Former support just below 1.2000 has held as resistance so far.  A break above 1.2000 would destroy our confidence in the bearish bias.

Strategy:  Remain Bearish against 1.2165, target 1.1400

Commentary: There is no change to the medium term outlook that the USDCAD will rally through 1.0699 (as long as 1.0340 is intact).  Near term though, it looks like another leg lower to complete a correction will take place.  Look for a thrust lower from a triangle to test either the 61.8% of 1.0340-1.0699 at 1.0477 or the 78.6% at 1.0417.    

Strategy: Bullish now, against 1.0340, target TBD

 
Commentary:  The decline from .8870 is the beginning of larger wave 4 within the 5 wave rally from .7268.  Over the next several weeks, the AUDUSD could decline to the former 4th wave at .8162.  Wave A of the decline ended at .8458 and wave B is underway now.  Wave B is unfolding as a flat or triangle.  If a flat, then price may top close to .8664 (50% of .8870-.8458).  If a triangle is unfolding, then a range will persist between .8614 and .8444 for the next day or so.  The flat scenario is shown on the chart.

Strategy: Flat

 

Commentary: We wrote of two scenarios yesterday.  One had a flat unfolding, which means that a rally will occur towards the 38.2% of .8107-.7550 at .7762.  The other was a triangle, which would lead to a thrust lower.  Both scenarios remain possible, but the rejection of weakness yesterday at .7552 favors the former scenario of a flat unfolding.  Also, we can now count a triangle in the B wave position of the flat.  Look for wave C of the flat to work towards .7762 (and possible higher).         
 
Strategy:  Flip to bullish, against .7530, target 1 at .7760

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