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Yen Poised to Break Out of Range

Friday, 08 February 2008 13:52:17 GMT

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Written by Jamie Saettele, Technical Currency Strategist

A larger Dollar bear leg MIGHT be underway now.  Bearish potential (for the USD) is great and risk at this point is low.

02-08-08techs1

02-08-08techs2

We maintain that the decline from the November 2007 high at 1.4966 is the wave 3 top within a 5 wave advance from the June 2007 low at 1.3261. Since 1.4966, the EURUSD is either in the final stages of a triangle or is tracing out a larger flat correction.  Either way, higher prices are expected in the coming weeks with objectives in the mid 1.50s. This could complete larger wave 3 within the 5 wave advance from the November 2005 low at 1.1638. 
 
Visit our recently updated Euro Currency Room for specific resources geared towards this currency.

02-08-08techs3

IF a triangle has been unfolding from the November high at 1.4966, then the pattern is complete or very close to complete. Wave E of the triangle has taken the form of a zigzag. A slight new low is possible but price should remain above 1.4365. Even if a larger turn did occur at 1.4950, then a corrective rally is expected to at least 1.4650.
 
Visit our recently updated Euro Currency Room for specific resources geared towards this currency.
 
STRATEGY: Bullish, against 1.4364, target mid 1.50s

02-08-08techs4

IF a triangle has been unfolding from the November high at 1.4966, then the pattern is complete or very close to complete. Wave E of the triangle has taken the form of a zigzag. A slight new low is possible but price should remain above 1.4365. Even if a larger turn did occur at 1.4950, then a corrective rally is expected to at least 1.4650.
 
Visit our recently updated Euro Currency Room for specific resources geared towards this currency.
 
STRATEGY: Bullish, against 1.4364, target mid 1.50s

02-08-08techs5

After spending nearly a month in a tight range, the USDJPY is poised to break higher and test at least the mid 108s. A 61.8% Fibonacci is at 108.50 and a former congestion area is at 108.30. Although we remain long term bears due to the EW structure on the daily, COT data suggests that a more pronounced rally is possible if not probable.  
 
Visit our recently updated Yen Currency Room for specific resources geared towards this currency.

02-08-08techs6

For the first time in months, the GBPUSD daily count is clear. The pair has declined in 5 waves from 2.1160, indicating that a significant top is in place. The 5 wave decline is viewed as either wave 1 in a 5 wave bear cycle or wave A in a 3 wave bear cycle. In other words, longer term bearish potential is great. The rally underway now is either wave 2 or B and we will look for a top in the 2.0033-2.0463 zone. This corrective rally probably lasts for weeks if not most of this month. 
 
Visit our recently updated British Pound Currency Room for specific resources geared towards this currency.

02-08-08techs7

We have focused on the idea that a large B wave was coming to an end.  We maintain that stance as the B wave may be complete in the form of a double zigzag.  Expectations are for price to exceed 1.9957 in the coming weeks in wave C within the A-B-C rally from 1.9337.
 
Visit our recently updated British Pound Currency Room for specific resources geared towards this currency.
 
STRATEGY: Bullish, against 1.9335, target above 1.9957

02-08-08techs8

A corrective 4th wave rally may be underway now within the 5 wave decline from the October 2006 high at 1.2768. The USDCHF will likely trade in a choppy manner for the next month or so, but with an upside bias before a decline in a 5th wave completes the entire decline from the October 2006 high and gives way to a multi-year low.

02-08-08techs9

We are unsure of the pattern unfolding in the USDCHF.  “A triangle could be in its early stages right now in the USDCHF. The decline from the 1/22 high at 1.1122 is in 3 waves and the rally from the 2/1 low at 1.0728 is also in 3 waves (to this point).”  Another possibility is that an expanded flat is underway, which would require a rally through 1.1122 before being considered complete.

02-08-08techs10

The pattern in the USDCAD since the November low at .9055 is either an A-B-C rally that will lead to a new low (under .9055) or a 1-2 (expanded flat) base that will lead to a strong rally to new highs (suggesting that a multi-year USDCAD low is in place). Either way, price will come below .9755. Potential support from Fibonacci is at .9652 and .9511. 
 
Visit our recently updated Canadian Dollar Currency Room for specific resources geared towards this currency.

02-08-08techs11

We wrote yesterday that “the short term picture is clear. The decline from 1.0378 is clearly a 5 wave decline and an a-b-c corrective rally is underway now towards 1.0117. The next level of resistance is Fibonacci resistance at 1.0184. Look for a top and reversal near these levels in order to position for a drop below .9755.” Look for a spike through 1.0102 that would complete the rally from .9871.” The larger decline has resumed.
 
Visit our recently updated Canadian Dollar Currency Room for specific resources geared towards this currency.
 
STRATEGY: Bearish, against 1.0128, target below .9755

02-08-08techs12

As long as the AUDUSD rallies in 5 waves and declines in 3 waves, there is no reason to adopt a bearish outlook. The rally from .8512 is expected to exceed .9400 in the coming weeks. Objectives are near 1.00.

02-08-08techs13

We do think that the rally from .8512 to .9014 completed wave 1 in a larger 5 wave bullish cycle and that the decline from .9014 to .8817 completed wave 2 of that cycle. This count implies that wave 3 up is underway now and that the rally should accelerate. The rally has yet to do that, which calls into question our count. Still, as long as price is above .8817, we remain bulls.
 
STRATEGY: Get bullish near .8915, against .8874, target TBD

02-08-08techs14

The drop on 1/22 to .7383 completed a large correction that had been underway since November. Like the AUDUSD, the NZDUSD trend remains up and an upside breakout will probably lead to a test of the July 2007 high at .8108.

02-08-08techs15

One can make the case that a larger decline is underway from .7966 because the decline from .7966 to .7781 is in 5 waves. This suggests that another 5 wave decline is underway now, towards at least .7742 (100% extension) and .7628 (161.8% extension). 

 

 Tell us what you think about this report: contact the strategist about the article at jsaettele@dailyfx.com
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