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FX Technical Weekly 04-23

FX Technical Weekly 04-23

2010-04-23 21:52:00
Jamie Saettele, CMT, Sr. Technical Strategist

Euro / US Dollar

eurusd - table

Joel:  Has broken to fresh 2010 lows below 1.3270, with setbacks accelerating and now likely to extend towards next key support in the 1.2885-1.3000 area. While 1.3000 offers itself as some formidable psychological support, 1.2885 represents the low from April 2009. Also coming in by 1.3000 is a key 78.6% fib retrace off of the major 2008-2009 move. Look for any inter-day rallies to now be well capped ahead of 1.3500.   
  Jamie: The rally from 13266 was in 3 waves and has now been completely retraced.  As small as the advance was relative to the preceding 5 wave decline from the 2009 high, it does fit as a 2nd wave correction (ending in the prior 4th wave area).  Today’s turnaround may be the beginning of a small 2nd wave.  Initial resistance is 13415 and additional resistance is 13505/20.



British Pound / US Dollar

gbpusd table

    Joel: Rallies have stalled out just over 1.5500, with the market adhering to the broader downtrend and rolling over in favor of a bearish resumption. Last Friday’s bearish reversal day has seen good follow through already in the early week, and the risk now is for a test of next key short-term support by 1.5130 over the coming sessions. The 1.5130 level is the key level to watch, with a break here to accelerate declines and re-expose the 2010 lows down by 1.4780. Only back above 1.5525 negates and gives reason for pause.         
 Jamie:  A 4th wave correction may be complete in the GBPUSD just above 15500.  The rally from 14780 consists of two 3 leg advances; a double 3 complex correction.  After dropping below a short term support line, the pair has rallied sharply in what may be a small 2nd wave.  I am cautiously bearish against 15530.  A drop below the short term channel is needed in to restore a high degree of confidence in the bearish position.  Rallying above 15530 would shift focus to 15700.


 gbpusd 0423



    Joel: As per our commentary in the previous week, the market has stalled out ahead of 0.9400 and looks like it could now be looking to accelerate declines. Monday’s break below 0.9225 sets up a double top formation, with a measured move downside extension projected towards the 0.9050 area over the coming sessions. Below 0.9050 then exposes more meaningful support at 0.9000. Only back above 0.9385 would delay outlook and give reason for pause.  Look for a break back below 0.9160 to accelerate declines. 
    Jamie: I remain focused on last Monday’s reversal, which brings forth the potential for a double top with the November 2009 high at 9400.  However, bears have been unable to register a close below the short term support line (not to mention the longer term channel line).  Of note is the dark cloud cover candle pattern on the weekly (bearish reversal).



New Zealand Dollar / US Dollar

nzdusd0305 tw table

      Joel: Despite the recent surge back above 0.7100, we retain a bearish bias and look for the market to top out somewhere ahead of 0.7200 in favor of a major bearish resumption. Recent rallies have stalled out by 0.7195 and this could very well be the high we are looking for ahead of the next major downside extension. Short-term support comes in by 0.7050 and a break below this level should help to accelerate declines.  
    Jamie:  Since the October top at 7640, the NZDUSD has stair stepped lower.  The structure of the decline at this point is 3-3-5, which is the substructure of a flat.  However, there are several variations that would allow for the beginning of a larger decline.  As long as price is below 7446, I lean towards a long term bearish position.  7240 is resistance.  Watch the top of the short term channel as well. Notice that 21 day ATR is at its lowest point since July 2007 and July 2008 – in both instances the NZDUSD plunged immediately.  I am not saying that will happen now but I don’t think this is an indicator to ignore.  



US Dollar / Japanese Yen

usdjpy0423 table

  Joel: As per our earlier commentary this week, setbacks have been very well supported on a close basis above the 92.00 handle, which offered itself as some solid former resistance now turned support, and we now look for a higher low by 91.60 ahead of some fresh upside over the coming days back towards and eventually through the current 2010 high by 94.75. Only back under 91.60 would negate and give reason for pause.
   Jamie:  If the USDJPY is on the verge of breaking higher, then price should remain above 9270.  This is the level I am moving risk to on these longer term positions.  9712 is where the rally from 8813 would equal the rally from 8481 (arithmetic) and is the initial objective.       


US Dollar / Canadian Dollar

usdcad table

  Joel: Our overall outlook for the pair remains highly constructive and as such, any dips below parity should be used as formidable buy opportunities. At this point however, we can not rule out the potential for a short lived dip to test 0.9900. But any additional declines should ultimately be well supported by 0.9900 which represents the 78.6% fib retracement off of the major 2007-2009 move. Longer-term cyclical studies continue to warn of some major upside ahead, but initially, at a minimum, a break back above 1.0220 will be needed to reaffirm and accelerate gains. 
  Jamie: The USDCAD has bounced from its lowest level since June 2008.  A bullish engulfing pattern is visible on the weekly (last week’s candle), so the new low may prove temporary.  What’s more, Wednesday’s candle was a hammer (bullish reversal), which was confirmed on a rally above its high.  A small 5 wave move higher on the hourly would present us with an opportunity to buy a pullback (probably next week).  We don’t have that yet however so the USDCAD does remain vulnerable.  But consider that 12 month momentum (below) has turned up from its lowest level since 2003).  9710/90 would be the next level of potential support on a break lower.    


US Dollar / Swiss Franc

usdchf table

    Joel: The overall structure is constructive with a medium-term higher low now sought out by 1.0435 in favor of the next major upside extension beyond 1.0900 and towards 1.1500 further up. Ultimately, it is the 200-Day SMA that we use as our gauge for direction, with the longer-term SMA, which comes in just under 1.0500, expected to continue to prop setbacks on a close basis. So long as the market holds above this SMA on a close basis, we recommend looking for opportunities to be long. Short-term support now comes in by 1.0700. It is also worth noting that the 100-Day SMA has recently crossed up above the 200-Day SMA for the first time since September 2008, which is another bullish signal. 
   Jamie: The overlapping nature of the USDCHF advance from 9916 is a warning that the rally may be a completed 3 wave correction.  However, from a simplistic point of view (which is often the best view), price action since February top has been nothing more than a sideways correction.  As such, I am cautiously bullish against 10430 (longer term).



Euro / Japanese Yen

eurpjpy table

    Jamie: The EURJPY has rallied (significantly) from the lower end of its range.  One possibility from a EW perspective is that the rally from the February low is unfolding as either a flat or double 3 correction.  Both point higher.  12320 and 12475 are short term supports.   
  Joel: Attempts to break above 128.00 have failed thus far, with the market unable to extend gains beyond the figure and towards the 130.00 inverse head & shoulders objective and reversing sharply back below former neckline resistance at 125.00. 123.00 is now the key level to watch below, with a break to officially negate additional recovery prospects and expose the cross to additional weakness back towards the 2010 lows by 120.00. We remain sidelined and will await a clearer signal.  




British Pound / Japanese Yen

gbpjpy trable

    Joel: Price action is very choppy here and although the market triggered a double top in the early week that would suggest a potential drop to 137.00, setbacks have stalled out by some solid former resistance turned support just over 139.00. From here, it is too difficult to establish clear directional bias, and we would recommend waiting for a break back above 145.00 or below 139.40 for a better indication of where the market is headed. 
    Jamie: The GBPJPY appears to be on the verge of breaking higher.  The next level of resistance is not until 15070.  14410 is short term support.  It is worth mentioning that March’s candle completed a piercing candle formation.  




Euro / British Pound

eurgbp tabler

  Jamie: After testing the January low at 8600, the EURGBP has bounced and is nearing initial resistance at 8745.  Trading above the channel line would indicate the potential for additional strength towards 8870-8915 (short term bullish opportunity).  Today’s bullish engulfing candle pattern favors the upside next week.  I view the larger trend as down however and a move into that level would present a longer term short opportunity.
    Joel:Not looking to force any trades here, but the cross has been under some intense pressure of late and now eyes a retest of next key support by 0.8600, which represents the 2010 low from January. However, any additional declines from there should be limited, with daily studies trading into oversold territory and warning of the need for a healthy corrective bounce. Should the market get down below 0.8600, we like the idea of buying into the dip, with hourly studies to likely also be very oversold and thereby considerably increasing the likelihood of a playable short-term corrective bounce. Look for a recovery rally back towards 0.8800 at a minimum over the coming days before considering bearish continuation.






 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.

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