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FX Technical Weekly 05-14

FX Technical Weekly 05-14

2010-05-14 20:09:00
Jamie Saettele, CMT, Sr. Technical Strategist
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Euro / US Dollar

EURUSDTABLE1

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Joel:The latest bout of consolidation has been broken with a fresh lower top by 1.3100 being confirmed following the drop to fresh 2010 lows below 1.2530 on Thursday. From here, next key support comes in by 1.2330, which represents the 2009 lows. A daily close back above 1.2680 will be required at a minimum to delay the bearish momentum, while ultimately, only back above 1.3100 will shift the short-term structure.  
                           Jamie:As focused on in recent days, “a new low would potentially complete 5 waves down from 13822, which in turn would complete 5 waves down from 15150.  There is a cluster of Fibonacci objectives in the mid 12300s, which is also near the 2008 low (12327).”  The EURUSD is approaching the 2008 low (12330), which is reinforced by the mentioned Fibonacci extensions AND several downward sloping support lines.  I am on the lookout for some sort of exhaustion move.  Keep an eye on USDCHF resistance (see USDCHF comments).

EURUSD0514

British Pound / US Dollar

GBPUSD0514

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Joel: The market has finally taken out the key 2010 lows by 1.4780 to confirm a fresh medium-term lower top by 1.5500 and open the next major downside extension towards critical psychological barriers by 1.4000 over the coming weeks. At this point however, with daily studies looking stretched, we would not rule out the possibility for additional consolidation above 1.4500 (on a close basis) before the market sets to break lower. Any inter-day rallies should be well capped ahead of 1.5000. 

 

 

 Jamie:The GBPUSD is well into its 5th wave and on the verge of taking out 14470.  Short term resistance is 14700 if needed.  14400 is an objective, which is the 61.8% extension of waves 1 through 3.


  

 GBPUSD0514 chart

Australian Dollar / US Dollar

AUDUSD0514 table

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Joel:The market has fallen apart since failing to clear barriers by 0.9400, with setbacks now accelerating below 0.9000 and 0.8800 to put the focus on a major platform base by the 2010 lows at 0.8580. Look for a lower top now by 0.9080, to be confirmed on a break back below 0.8740 over the coming sessions. Back above 0.9080 delays and exposes 0.9150-0.9200 further up.
  Jamie:I am of the mind that the commodity currencies are about to take the lead from the European currencies as it pertains to bearing the brunt of dollar strength.  Stay focused on the potential double top with the November 2009 high at 9400.  The AUDUSD has plunged below its year + channel and 13 week SMA and the next level of interest on the downside is the February low at 8575 (below there confirms the double top).  If 8575 is broken, then the objective would be 7700, which is the July 2009 low as well as where the decline from 8571 would equal the 9411-8571 decline (double top measuring technique).  Price ideally stays below 9030 but I am not tightening risk yet for fear of being whipsawed prior to the expected plunge.  

AUDUSD0514

New Zealand Dollar / US Dollar

NZDUSD0514 table



Joel:While some might argue that despite the latest pullbacks, the market is still locked in a bull channel off of the 2010 lows, we contend that the channel is on the verge of being broken, with additional declines seen over the coming weeks. However, the 200-Day SMA, which has been supporting much of the uptrend this year, needs to be convincingly broken to confirm our bias and accelerate declines. While we have seen a one day close below the longer-term SMA a number of times this year, a two-day close below the 200-Day SMA will be required to trigger the shift in structure. In the interim, look for intraday rallies to be well capped ahead of 0.7250.   

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 7335, I lean towards a long term bearish position.  Watch the short term channel for a break.

nzdusd0514

US Dollar / Japanese Yen

USDJPY0514 table


  Joel:The whipsaw price action from violent trade in early May has delayed our outlook but certainly does not change our overly constructive bias. The medium-term higher low from early March just over 88.00 remains intact, with the market stalling out ahead of the level, and we now look for a push higher from here back towards and through next key topside barriers by 95.00. Only a break back below 88.00 would negate and give reason for pause.
  Jamie:BIG PICTURE: “The decline from the 2007 high is viewed as a leading diagonal.  Leading diagonals are often followed by sharp second wave advances (sometimes as much as 78.6%).  The 61.8% and 78.6% levels are 10915 and 11577.  Trading above 9500 would put the pair back on track towards those levels.  HOWEVER, looking back nearly a decade, there have only been 4 instances of a weekly range as large as last week’s range.  In each case, a sharp retracement gave way to yet additional weakness.”  SHORT TERM: I still like playing the range with initial support just below 9100 (50% retracement and former pivot).  

usdjpy0514

US Dollar / Canadian Dollar

usdcad0514 table


  Joel:It has been over a year since the market has traded above or even close to the 200-Day SMA, and the latest impressive surge has finally opened a break back above the longer-term moving average to potentially warn of a major shift in the structural outlook of the pair. We have consistently advocated for a higher rate, even with the market dropping below parity, and the recent move back above 1.0500 helps to solidify our bullish bias. The latest upside surge also seems to threaten the integrity of a downtrend from 2009, and a break of 1.0780 is what will be needed to force an acceleration of gains and officially confirm a shift in the longer-term structure. For now, look for the latest setbacks to be well supported on a close basis above 1.0100. A close back above 1.0250 will confirm and accelerate. 

Jamie:The USDCAD advance is playing out and the pair is nearing initial resistance at 10340.  10440 would be the next level resistance (watch 10400 too, which was the gap level).  “The rally from 9928 to 10746 is left as a correction but the succeeding decline is also a correction”.  Either a triangle or flat appears to be unfolding from the 9928 low.  In the case of a triangle, the USDCAD would probably reach 10500-10600.  In the case of a flat, the pair would exceed 10750.  The 78.6% retracement has held as support.  

usdcad0514

US Dollar / Swiss Franc

USDCHF0514 table


  Joel:The overall outlook remains highly constructive and while daily studies do not rule out the possibility for some additional short-term consolidation to allow for technicals to unwind, any setbacks should be very well supported ahead of 1.0900, in favor of an eventual push into the 1.1500-1.2000 area. A close back above 1.1245 opens next upside extension.
  Jamie:Like the EURUSD, the USDCHF is probably closing in on a top that would last for several weeks.  11382-11425 is a target zone (Fibonacci extensions).  This zone intersects with the channel top on Monday afternoon (intraweek seasonality indicates that price extremes for the week tend to be made on Mondays).  In other words, we may get an exhaustion move into a high on Monday. 

USDCHF0514

Euro / Japanese Yen

EURJJPY0514


  Joel:While we projected a drop back to retest the 2009/multi-year lows by 112.00 following the break of the latest consolidation lows, we did not anticipate that the move would be so fast and so intense. Last Thursday’s sharp drop easily managed to clear 112.00 and open an acceleration of decline down to 110.60, ahead of the latest jackknife reversal. It is extremely difficult to speculate where we go from here and we recommend standing a side for a bit to see how things play out. However, a lower top could now be in place by 122.30 ahead of the next drop below 110.00. Back above 122.30 delays. 

Jamie:I do expect a test of last week’s low.  How soon is difficult to assess.  In 1998, the Asian crisis resulted in a test of the spike low 3 weeks after the initial plunge (then additional consolidation followed by a resumption of weakness).  In 2008, the low was tested the next week.  Using history as a guide, I expect a test of the low before several months of consolidation.  There is an objective at 10994 (161.8% extension).  

EURJPY0514

British Pound / Japanese Yen

gbpusd0514 table

  Joel:The market has been gradually channeling lower since August 2009, making a series of lower highs and lower lows. The latest break to fresh 2010 lows below 132.00 now sets up a fresh medium-term lower top by 146.00, potentially opening the next major downside extension towards the historic lows from 2009 by 118.85 over the coming weeks. For now, look for any inter-day rallies to be well capped ahead of 142.00. 

Jamie:A drop to a new low (below 13000) should complete 5 waves from 14600.  Expectations would then be for a recovery/consolidation that lasts for several months.  This analysis fits with my expectations for the EURJPY.  

gbpjpy0514

Euro / British Pound

EURGBP0514 table


  Joel:The intense bout of selling has finally stalled out for now, with the latest setbacks finding support by the previous multi-week consolidation lows in the 0.8400’s. Next critical support comes in exactly by 0.8400, and this level needs to be taken out to open another major downside extension. Until then, the risks are for some more consolidation and a bounce back towards the 0.8800-0.8900 area. As such, we recommend remaining on the sidelines until a clearer opportunity presents.
  Jamie:The rally from the low (8427) is not an impulse, but neither is the decline.  A triangle, flat or some complex correction is underway.  Expectations are for higher prices then.  8650 is initial resistance.

EURGBP0515

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

 

001trades0514

 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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