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Yen Triangle Indicates Breakout is Imminent - Kiwi Shows Evidence of Significant Top

By , Sr. Technical Strategist
29 March 2007 11:59 GMT

03-29-07techs1

EURUSD – See the previous day’s analysis for a longer term perspective on the EURUSD.  Near term, the subdivisions impart a bullish tone.  We focused on this yesterday and will again today.  That is, the decline from 1.3413 to 1.3256 is in 3 waves and thus corrective.  We proposed yesterday that the rally from 1.3256 to 1.3377 is either wave i or b.  With the rally from 1.3302 taking on impulsive characteristics, we are expecting a break above 1.3377 and ultimately 1.3413 with 1.3302 holding as support.  1.3483, the 3/11/2005 high, is potential resistance on a break above 1.3413.  Coming under 1.3302 negates the bullish structure described above.       

03-29-07techs2

USDJPY – The USDJPY is at a crossroads.  The decline from 118.45 broke below triangle support momentarily before snapping back to above 117.00.  As such, this rally is most likely the D wave that will complete the triangle that began on 3/5.  This is what we are working with as long as 118.51 remains intact as resistance.  The triangle structure suggests that the next big move is down, below 115.15 towards potential trendline support drawn off of the January 2005 and May 2006 lows just below 114.00.  Bollinger band width is the lowest since late February, just prior to the breakdown from 121.66 (tight Bollinger bands indicate breakout potential).  From a longer term perspective, the 20 day SMA recently crossed below the 200 day SMA (200 day SMA is resistance at 117.75).          

03-29-07techs3   

GBPUSD – We are still looking for one more high to be registered above 1.9729 before a big turn lower.  We are looking higher in order for a 5th wave to complete a 5 wave bullish sequence that began at 1.9243.  Wave 1 would equal wave 5 at 1.9823.  The bullish structure is strong above 1.9569.  The 3 wave setbacks from 1.9729 and 1.9726 both favor the short term bullish outlook.  A break of the 1.9556/69 support area would warrant reconsideration of our position.     

03-29-07techs4

USDCHF – The USDCHF continues to chop around between 1.2100 and 1.2200.  Price has held below 20 day SMA and the hourly shows a possible head and shoulders continuation pattern.  Resistance in the 1.2180 area has proved formidable thus far and 1.2080 has attracted buyers.  A break of one of these levels would provide a directional bias. 

03-29-07techs5

USDCAD – This big decline is likely the C wave of an A-B-C decline from 1.1879.  1.1512 is where the C wave decline would equal the A wave decline.  Support is reinforced by the confluence of channel support / 11/21/2006 high at 1.1470.  RSI (daily) is nearing oversold territory and CCI (daily) is below -100.  The pair is likely to chop lower to test the mentioned support near 1.1470/1.1512 before a major rally attempt.  A rally through 1.1679 (3/13 low) suggests additional bullish potential.  Near term, a triangle may be forming.  In this case, the range will tighten with 1.1640 capping upside and 1.1529 capping the downside for the next few days.               

03-29-07techs6

AUDUSD –  Focus remains on .8130 but the Aussie is nearing the latter stages of a long term rally.  Daily RSI has crossed above and then below 70 (overbought) for the first time since November 2006.  The rally from .7680 is in 5 waves and could be the end of the 5th wave in the 5 wave bullish sequence that began in April 2001 (see chart below).  If this is the case, then we are near a major top and the next big move is towards .7000.  There is no evidence yet that a top is in place – we’ll require a 5 wave decline (even at the smallest degree) in order to claim that a top is in place. 

03-29-07techs7 

NZDUSD – We are continuing with the very short term analysis because it is possible that we are at a major turning point and we need to be precise in these instances.  The 5 wave decline from .7207 argues that a top is in place.  Further, the rally has faced supply at the previous 4th wave – a guideline in Elliott and a common occurrence.  If a top is in place at .7207, then the next leg down would be a 3rd wave, which likely takes price close to .7000.  A break below .7081 bolsters the call for another leg down.  .7207 is critical.

03-29-07techs8

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29 March 2007 11:59 GMT