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FX Technical Weekly 02-12

FX Technical Weekly 02-12

2010-02-12 21:09:00
Jamie Saettele, CMT, Sr. Technical Strategist

 Euro / US Dollar


Joel: It is difficult to determine where we go from here in the short-term, with the market correcting from oversold levels on Tuesday before stalling out by the 10-Day SMA (by 1.3800), which seems to be offering itself as a solid form of resistance over the past several days. We retain a bearish bias and would look for the 10-Day to once again cap ahead of some consolidation and an eventual renewed bout of weakness through 1.3585. A close back above the 10-Day SMA would however delay and open the door for additional corrective gains potentially towards 1.4200 before bearish resumption.  
Jamie: The EURUSD decline below 13584 gives credence to my argument that the pair is in “a 3rd of a 3rd wave…an objective is 13081 (161.8% extension).”  Keep risk at 13842 and 13700 should provide resistance if needed.  Use the unorthodox channel as a point of reference.  Price is now below the midpoint of the channel, which is bearish.



British Pound / US Dollar

gbpusd0212 table

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 a risk for additional corrective gains before any renewed weakness. The 10-Day SMA comes in by 1.5750, and we would expect to see any rallies well capped by the latter in favor of a bearish resumption. Only a close back above the 10-Day would delay outlook. 

Jamie: The GBPUSD broke its diamond top last week and the trend is down against 16076.  The rarity and reliability of the diamond pattern makes the break especially bearish.  Given the 3rd of a 3rd count from 16464, the first Fibonacci confluence is not until 14714/62.  The reversal occurring at the 38.2% / Elliott channel resistance strongly favors the idea that the rally is a 4th wave.  15338 is where wave v (if it is a v) would equal wave i.  Favor the downside.



Australian Dollar / US Dollar

aud0212 table

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 however in the process of bouncing from oversold, so from here, we would not rule out the potential for additional gains. However, any rallies should be well capped by 0.9000 ahead of renewed weakness
Jamie: After breaking below the December low, the AUDUSD has found strong support from the confluence of the 200 day SMA / channel support.  A break of this area is required to inspire confidence in the bearish bias (against 8935).  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.  

audusd 02 12

New Zealand Dollar / US Dollar

nzd02 12 table

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 in the process of unwinding from oversold, so from here, we would not rule out the potential for additional short-term upside. However, any rallies should be well capped by 0.7100 ahead of renewed weakness.
Jamie: The NZDUSD has found resistance at the confluence of the 61.8% retracement / short term trendline.  The rally from 6804 is in 3 waves (corrective…looks like a double 3), which leaves the NZDUSD vulnerable.  The next major support for the NZDUSD is not until 6600.  A Fibonacci confluence at 6365-6465 serves as a bearish objective.


US Dollar / Japanese Yen

usdjpy 02 12 table

Joel: Last 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 rally (from 8481) is corrective, which leaves the pair vulnerable to weakness below that level.  Still, a larger correction may underway since the decline from 9380 is not impulsive either.  8832 and 8736 are potential supports.  A rally above 9130 is required in order to turn bullish.  Cautiously favor the downside against that level at this point.

usdjpy 02 12

US Dollar / Canadian Dollar

usdcad table 02 12

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. As such, the latest round of sharp setbacks into the 1.0500 area, should be used as a formidable opportunity to build a compelling long position. Only a close back under 1.0400 would give reason for concern.
Jamie: The USDCAD is toying with me.  Having been convinced that an expanded flat was complete, I was proved wrong when the pair dropped below 10540.  However, I maintain a longer term bullish bias against 10223.  Support should be strong at 10415, which is former resistance and the 61.8% retracement.  It is also possible that the USDCAD will not make it to that level as the pair has found support at the former 4th wave zone.  Long term traders can establish longs against the January low but short term traders should await clarification of the near term picture.  

usdcad 12 02

US Dollar / Swiss Franc

usdchf 02 12 table

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 towards 1.0800, a short-term corrective pullback and consolidation can not be ruled out. Nevertheless, we would look to use any dips into the 1.0500 region as a formidable opportunity to build on existing longs in anticipation of a fresh higher low.
Jamie: The USDCHF has held trendline support.  The line is unorthodox in that it connects 2nd waves at multiple degrees of trend.  11026-11091 is a target area.  Favor the upside against 10607.  

usdchf 02 12

Euro / Japanese Yen

eur jpy table 02 12

Joel: Setbacks have now finally reached and slightly exceeded 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 in the process of recovering following last Thursday’s violent declines. A break and close back above 125.00 will now be required to confirm basing. In the interim, we recommend that traders stay on the sidelines.
Jamie: The larger trend is down against 12701 but potential remains for additional strength above 12430.  As mentioned Wednesday, it is like the EURJPY to lull us to sleep before its next big move – that may be what is happening here.  The initial downside target is 11544.   

eurjpy 0212

British Pound / Japanese Yen

gbp jpy 02 12 table

Joel: Last 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 by 139.00 has been broken and a sustained break will signal a fresh wave of declines, while inability to close 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.”  Like the EURJPY, the trend is down and if you want to catch the big moves, you must be willing to sit through corrections.  14200 is clearly in 3 waves and the level ideally holds but a rally above there would not negate the longer term bearish bias.  In the event of a break, 12688 is the 100% extension of the prior down move and is the initial objective.  Again, the trend is down against 14535.     

gbpjpy 02 12

Euro / British Pound

eurgbp02 12

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 triggering an inverse head & shoulders pattern that now projects gains back towards 0.9000 over the coming days. Any rallies into 0.9000 should then be used as an opportunity to build on existing shorts.  
Jamie: The EURGBP has strengthened in what I have treated as a small 4th wave.  Price reversed from just above the former 4th wave extreme at 8800 now; which is a common area for corrections to end.  I’ve been expecting a final small 5th wave to complete the decline from 9158 and that decline appears to be underway now.  8537-8574 is a target area.  The lower level is where wave 5 = wave 1 (of c) and the higher level is where wave c = wave a (of C).

eur gbp 02 12 chart

TRADE LIST *Entry prices for trades that are recommended ‘at market’ are listed as the price at the time of publication


table 2

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.  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.

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