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FX Technical Weekly
Friday, 08 May 2009 22:18:43 GMT  |  Jamie Saettele, Senior Currency Strategist and Joel Kruger, Technical Currency Strategist
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-EURUSD breaks out
-GBPUSD resistance at 1.5380
-AUDUSD at Fibonacci resistance
-NZDUSD breaks above April high
-USDJPY head and shoulders pattern
-EURJPY indecision
-EURGBP triangle

EURO / US DOLLAR

 2009.05.08_techw_eur_1
Classical Outlook: Has now retraced just over 78.6% of the major 1.3740-1.2885 move with the market likely to test next key topside resistance by 1.3585 over the coming hours. A break above 1.3585 should then accelerate gains and open a full retracement back to 1.3740. Key short-term support comes in at 1.3340 with dips expected to be well supported ahead of this level. Only back under 1.3340 will delay.
Elliott Wave Outlook: I wrote last week that “the push above channel resistance suggests a rally through 1.3742 and possibly as high as 1.4150-1.4200 (61.8% of decline from 1.4723 and 100% extension of 1.2510-1.3742).”  Unfortunately, our 1.3125 entry was not reached but as suggested by last week’s comments, there is additional upside.  Price should remain above 1.3342 on its way to mentioned levels.  There is potential support next week in the 1.3450-1.3520 zone. 

 2009.05.08_techw_eur_2


BRITISH POUND / US DOLLAR

 2009.05.08_techw_gbp_1
Classical Outlook: The market has shown zero follow through from Thursday’s bearish outside day after reversing sharply back above Thursday’s 1.5200 trend highs. Above 1.5200 now opens a direct test of the 1.5375 2009 highs. A break back below 1.4945 is required to take the pressure off of the topside.
Elliott Wave Outlook: After bouncing from Elliott channel support.  The GBPUSD may be nearing the completion of a corrective 4th wave within the 5 wave decline from 2.1160.  Levels to watch for as resistance are 1.5378 and 1.5728 (defended by 200 day SMA).  There is potential support at 1.5175 next week.

 2009.05.08_techw_gbp_2


AUSTRALIAN DOLLAR / US DOLLAR

 2009.05.08_techw_aud_1
Classical Outlook: Short trade triggered on Friday @0.7645 (see Daily Classical) with the pair finally crossing over into overbought and trading above 70 on the RSI. We see limited upside potential from here and expect the market is near the point at which it will start to roll back over. Back below 0.7500 is required to confirm and accelerate declines. Fresh 2009 highs have been set on Friday.
Elliott Wave Outlook: Last week I wrote that “the rally from .6953 is wave v of C and an objective is .7630 (which is where wave v of C would equal wave i of C).  This is close to the 50% of the decline from .9822.”  The AUDUSD has reached the 50% retracement (.7690) but there is no sign of a top yet.  There are warning signs though, such as divergent RSI on the daily.  Staying above .7507 keeps the near term pointed higher.  Potential support is at .7625.

2009.05.08_techw_aud_2


NEW ZEALAND DOLLAR / US DOLLAR

 2009.05.08_techw_nzd_1
Classical Outlook: Has broken to fresh 2009 highs on Friday after clearing the previous 0.6035 highs from January. Daily studies still show room to run and we look for some more upside here potentially back towards 0.6085-0.6130 before considering a potential short-term reversal. Back below 0.5900 is now required to negate bullish price action and take pressure off of the topside.
Elliott Wave Outlook: The NZDUSD broke above what is now considered its wave A high at .5987.  Fibonacci resistance in the weeks ahead is at .6340 and .6470.  In summary, the rally from .5484 is wave C of an A-B-C advance.  This rally will complete the correction but there is significant upside potential from current price.  Staying above .5890 keeps the short term pointed higher and there is potential support next week at .5980.

2009.05.08_techw_nzd_2


US DOLLAR / JAPANESE YEN

 2009.05.08_techw_jpy_1
Classical Outlook: Daily studies are mixed and the market continues to chop around with no clear directional bias. Key levels to watch above and below now come in by 99.75 and 97.95 respectively, but we do not recommend taking any positions until a clearer opportunity presents. Our strategy will be to wait for studies to either show overbought or oversold before looking to enter the market.  A closer look at the daily chart does seem to favor a bearish bias.
Elliott Wave Outlook: The long term trend remains down and I expect a resumption of that trend although there is near term upside potential.  The pair has carved out a potential head and shoulders since the March top.  The neckline crosses 96.31 Monday and increases about 25 pips per day.  A break of the line would warrant a bearish bias against 99.72.

2009.05.08_techw_jpy_2


US DOLLAR / CANADIAN DOLLAR

 2009.05.08_techw_cad_1
Classical Outlook: We have been attempting to buy the pair over the past several weeks with little success and little pain and have once again entered a long position on Friday by 1.1540 ( see Daily Classical) after stopping out at cost by 1.1660 earlier in the day. Daily studies are highly overextended and the market is due for a material corrective bounce over the coming days. We still see the pair trading in a broader range dating back to the Fall of 2008 and view any opportunities to buy at current levels below 1.2000 as compelling. The market has set fresh 2009 lows on Friday.
Elliott Wave Outlook: I wrote last week that “a larger USDCAD decline is underway towards 1.1359 and perhaps even lower.”  Price is nearly at 1.1359 already.  Staying beneath 1.1762 keeps the near term trend pointed down and 1.1550-1.1625 is a resistance zone.

2009.05.08_techw_cad_2


US DOLLAR / SWISS FRANC

2009.05.08_techw_chf_1 
Classical Outlook: We are starting to get a little concerned with the market breaking down through critical trend support at 1.1165 on Friday to potentially open a move back to psychological barriers at 1.1000. Below 1.1000 opens a deeper drop to challenge 1.0865 which guards against the 2009 lows at 1.0610 from early January. Back above 1.1340 is required to take the pressure off of the downside.
Elliott Wave Outlook: I wrote last week that “the USDCHF decline is likely to extend.  1.0925 is the 61.8% of the advance from 1.0367 and potential support.”  1.0925 is a little over 100 pips from current price.  Staying below 1.1341 keeps the short term trend pointed lower and there is resistance at 1.1140. 

2009.05.08_techw_chf_2


EURO / JAPANESE YEN

 2009.05.08_techw_eurjpy_1
Classical Outlook: Has been quite constructive of late with the market in the process of retracing the major 137.45-124.40 move to near the 78.6% fib in the mid-134.00’s. Daily studies still show room for additional upside from here and the risks are for a full retracement on a break of 134.60 to 137.45. In the interim, setbacks are seen supported ahead of 130.00, with a break below required to shift focus back on the downside.
Elliott Wave Outlook: 5 waves down from 137.46 is bearish and suggests that the long term trend is down.  However, the decline could be wave C of an expanded flat.  Given the bullish count in stocks and the rally above the 200 day SMA, the upside seems more probable.

2009.05.08_techw_eurjpy_2


EURO / BRITISH POUND

2009.05.08_techw_eurgbp_1 
Classical Outlook: While our overall bias is for a much lower cross rate over the coming months, price action at current levels does not warrant any sell recommendations. The market seems content on chopping around for the time being before considering a more significant move. Rallies back above the 100-Day SMA towards the 0.9100 area should not be ruled out and we will look to sell on an approach to this level. Back under 0.8765 is required to open fresh drop.
Elliott Wave Outlook: With the strong rally yesterday, it is possible that a triangle is unfolding.  This would define the near term trend as bullish in wave D of the triangle up towards .9300.

2009.05.08_techw_eurgbp_2


EURO / CANADIAN DOLLAR

 2009.05.08_techw_eurcad_1
Classical Outlook: We do not expect to see setbacks extend much further with the broader structure still showing mildly constructive. As such, we recommend looking to establish long positions at current levels (we had recommended buying 1.5500 in the previous weekly analysis) in anticipation of a more significant rally back into the 1.6500 area. Daily studies are near oversold which helps to reaffirm basing prospects.
Elliott Wave Outlook: I wrote the last 2 weeks that “the decline from 1.6983 a C wave impulse that will end beneath 1.5633.  A drop below there would expose Fibonacci support at 1.5359.”  The long term trend is up against 1.4818 but that is too much risk to take on at this point.  There should be a buying opportunity against a higher low in the next few weeks.

 2009.05.08_techw_eurcad_2


TRADE LIST

2009.05.08_techw_table1

*Entry prices for trades that are recommended ‘at market’ are listed as the close price on the date published.

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