daily technicals

The USDJPY spiked lower to just above 88 last night.  The long term trend remains down but such spikes tend to mark extremes.  Bears may wish to lighten up on USDJPY shorts.

Daily RSI is above 70, so beware of a pullback next week.  The pullback could be sharp given current market conditions.    Former resistance in the 1.3085-1.3150 area is probable support next week.  Longer term, “it is likely that a bear rally is underway towards the mid 1.40’s, if not higher.  Resistance is not until the downward sloping trendline, which is at 1.36 today and decreases about 23 pips per day.” 

This morning’s spike to 88.10 may mark a bottom.  As I’ve mentioned many times before, spikes (especially in the Yen) tend to mark turns.  Bears may consider lightening up here.  Still, the rally from Friday’s (Dec. 5) low is clearly in 3 waves, which is corrective.  Staying below 93.07 keeps the longer term bear trend intact.  The ultimate objective remains below 80 (all-time low).

I maintain that a multi-month rally in the GBPUSD is likely underway, possibly to as high as the mid 1.60s.  The 38.2% of 2.0162-1.4465 at 1.6641 intersects potential channel resistance in early March.  This is also the 4th wave of two less degrees.  Near term, price should remain above 1.4674 and the rally is expected to accelerate in the days ahead. 

Higher highs and higher lows since the March low favors bulls longer term.  Near term, the decline from the top side of the channel looks impulsive and the rally from 1.1828 looks corrective.  The USDCHF is on its way to the lower end of the channel, which is at 1.1553 today and increases about 18 pips per day.   

Weakness is expected to extend below 1.2120.  A drop below 1.2120 would potentially complete wave ii of 5 (within the 5 wave rally from .9055) and give way to a strong wave iii rally that exceeds 1.30.  A deeper decline, closer to or even below 1.1459 is possible is a larger 4th wave as well.  Near term, the USDCAD should remain below 1.2749.

Staying above .6287 keeps structure bullish, working higher in a c wave that should end above .70.  There is short term trendline support near .64 near term.  A rally through .68 would bolster the bullish bias.

Kiwi rallied through trendline resistance (drawn off of the September and November highs) yesterday but has since pulled back slightly. Still, a trendline needs to put to test a few times before giving way to a break.  Staying above .5356 keeps the bullish trend intact.  Major resistance does not begin until .6137/83, which is the November 4 high / 38.2% of .8219-.5186.

Jamie Saettele writes Forex Technicals: The Day Ahead, Monday-Thursday (published at 6 pm EST), Daily Technicals every weekday morning (9 am EST), COT analysis (published Monday mornings), and analysis of currency crosses throughout the week.  He is also the author of Sentiment in the Forex Market.

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