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FX Technical Weekly: 02/05

FX Technical Weekly: 02/05

2010-02-05 21:53:00
Jamie Saettele, CMT, Sr. Technical Strategist
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Euro / US Dollar

020510fxtw1

Joel: The objective from the 1.4200-1.4600 consolidation break has now been reached, with the market dropping sharply to 1.3670 ahead of the latest minor bounce. While our core view continues to favor additional downside, short-term technical studies are now severely oversold and warrant a much needed and healthy corrective bounce. Inability to establish a close above the 10-Day SMA on Wednesday however, does keep the pressure on the downside. A break back above 1.4030 would be required to officially trigger a short-term correction. 
Jamie: The EURUSD has reached the 13650 initial measured objective, which could offer some support over the next several trading sessions.  The larger trend remains extremely bearish against 14030, as a 3rd of a 3rd wave is considered underway from there.  An objective is 13000 (161.8% extension).  Any rallies should prove corrective and faded.  In the event of a bounce, 13776-13825 is resistance.

020510fxtw2

 

British Pound / US Dollar

020510fxtw3

Joel: The market has finally taken out the key October lows just over 1.5700 to likely open the door for some medium-term setbacks over the coming weeks. However, daily studies are now looking quite stretched and there is the strong risk for a material corrective bounce before any additional weakness can take place. As such, look for a push back towards the 1.6000 area from where a lower top will carve out ahead of eventual bearish resumption and fresh declines below 1.5700. Next key support comes in by psychological barriers at 1.5500.
Jamie: The GBPUSD broke its diamond top.  The rarity and reliability of the pattern makes the break especially bearish.  Given the 3rd of a 3rd count from 16464, the first Fibonacci confluence is not until 14714/62.  Rallies should prove corrective and near term resistance is 15729 and 15781.   Former resistance at 15356 may be support next week.  Move risk to 16080.   

020510fxtw4

 

Australian Dollar / US Dollar

020510fxtw5

Joel: Critical medium-term support by 0.8730 has now been taken out to trigger the formation of a major double top that now projects a fresh wave of declines down towards 0.8000 over the coming weeks. Daily studies are looking stretched, so from here, we would not rule out the potential for a short-term bounce. However, any rallies should be well capped by 0.9000 ahead of renewed weakness.
Jamie: The AUDUSD has broken below its December low and focus is now on 8400-8500.  If the decline from 9055 is a 3rd wave, then the decline should extend to at least 8400, which is the 161.8% extension of wave 1.  Dropping below the bottom of the short term unorthodox channel would likely lead to an acceleration of the decline.  Move risk to 8940.

020510fxtw6

 

New Zealand Dollar / US Dollar

020510fxtw7

Joel: Although it is less prominent than in Aud/Usd, the market here has also arguably carved out a major double top that ultimately projects a fresh wave of declines down towards 0.6500 over the coming weeks. But daily studies are looking stretched, so from here, we would not rule out the potential for a short-term bounce. However, any rallies should be well capped by 0.7150 ahead of renewed weakness.
Jamie: The next major support for the NZDUSD is not until 6600 although a Fibonacci confluence at 6729/78 could provide short term support.  Any rallies should prove corrective and 6977 is resistance in the event of a bounce.  A Fibonacci confluence at 6365-6465 serves as the bearish objective. 

020510fxtw8

 

US Dollar / Japanese Yen

020510fxtw9

Joel: Thursday’s violent pullback certainly dents our shift in outlook in which we had been projecting significant upside over the medium-term. However, the market has still not managed to close below 89.00 and it will be interesting to see how things play out from here. In some ways, the recent whipsaw price action makes it a little easier to call. A break back below 88.55 will confirm bearish resumption, while above 91.30 should accelerate gains to the topside and put the constructive outlook back in play. Until then we remain sidelined.   
Jamie: The USDJPY has dropped to a new low but continue to favor weakness towards 8832 and 8736 in order to complete what might be a complex triple 3 correction from 9380 (wave z underway from 9130).  Very short term, a test of former support at 9007 is possible early next week.     

020510fxtw10

 

US Dollar / Canadian Dollar

020510fxtw11

Joel: The market has finally managed to clear resistance by 1.0745 to expose next key topside barriers by 1.0870 further up. Daily studies still show plenty of room to run, and we look for a retest and break of 1.0870 over the coming days. Any setbacks from here should be very well propped ahead of 1.0500, and dips towards this psychological barrier should be used as a fresh buy opportunity.
Jamie: Like the NZDUSD, the USDCAD completed an expanded flat this week.  A break above 10725 and then 10875 is expected as the pair is in a 3rd wave higher from 10543.  Friday’s sharp drop is considered corrective (wave ii).  Favor the upside against 10540.  A break above 10875 exposes 11000 and a 161.8% extension is at 11300. 

020510fxtw12

 

US Dollar / Swiss Franc

020510fxtw13

Joel: The latest break back above 1.0500 suggests that the market has now carved out a major base that exposes some fresh medium-term upside towards 1.1000 over the coming days. However, given the intensity of the run-up over the past few days from 1.0200 through 1.0700, a short-term corrective pullback can not be ruled out. Nevertheless, we would look to use any dips into the 1.0400-1.0500 region as a formidable opportunity to build on existing longs in anticipation of a fresh higher low.
Jamie: Upside momentum in the USDCHF is strong.  The pair is attempting a break above the top of a channel, which signals acceleration of the advance.  11026-11091 is a target area.  Risk can be moved to 10490. 

020510fxtw14

 

Euro / Japanese Yen

020510fxtw15

Joel: Setbacks have now finally reached the lower end of a multi-week range dating back to March of 2009 and it will be interesting to see if the cross can respect the range bottom and bounce, or finally break below the medium-term platform to expose a more significant drop back towards the 115.00 area. Short-term technical studies would however suggest that a bounce out from current levels is the more likely scenario with daily studies looking severely stretched following Thursday’s violent declines. A break back above 127.10 will now be required to confirm basing. In the interim, we recommend that traders stay on the sidelines.
Jamie: The EURJPY is nearing potential support from what was former resistance at 12000.  11554 would be the next level (161.8% extension).  Understand that in these volatile markets, there is always the risk of a violent short covering rally.  In such an event, the EURJPY could exceed 12336 and test former support at 12440.  The trend is down against 12701. 

020510fxtw16

 

British Pound / Japanese Yen

020510fxtw17

Joel: Thursday’s violent pullback has brought the cross back to some familiar range lows in the 140.00 area and it will be interesting to see how the market responds from here. Key support comes in by 139.30 and a sustained break will signal a fresh wave of declines, while inability to break below this level would suggest that the market has once again reached a base and could be poised for range resumption and some decent upside. 
Jamie: “Big picture, it remains my contention that the rally to 16310 completed a 4th wave correction and that the GBPJPY will eventually decline to a new low beneath 11879.”  Near term, there is the potential (NOT certainty) for a return to 14150-14200.  The trend is down and if you want to catch the big moves, you must be willing to sit through corrections.  12688 is the 100% extension of the prior down move and is potential support.  The trend is down against 14535.   

020510fxtw18

 

Euro / British Pound

020510fxtw19

Joel: While our core view has been intensely bearish for some time now, the latest sharp pullbacks leave us sidelined and looking to re-establish fresh short positions into rallies rather than at current levels. Daily studies now warn of a corrective rally, with the market in the process of potentially carving an inverse head & shoulders with the neckline by 0.8800. As such, we look for a break above 0.8800 to trigger the pattern and open a push back towards a measured move objective by 0.9000 before a bearish resumption.
Jamie: The EURGBP has strengthened in what is probably a small 4th wave.  8800 is resistance.  Since the rally is a 4th wave, a triangle is possible.  Price ideally stays below 8853 (wave .i low).       

020510fxtw20

 

020510fxtw21

 

Jamie Saettele publishes Daily Technicals every weekday morning, COT analysis (published Friday evenings), technical analysis of currency crosses on Monday, Wednesday, and Friday (Euro and Yen crosses), and intraday trading strategy as market action dictates at the DailyFX Forum.  He is the author of Sentiment in the Forex Market.  Follow his intraday market commentary and trades at DailyFX Forex Stream.   Send requests to receive his reports via email to jsaettele@dailyfx.com.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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