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FX Technical Weekly 07-09

FX Technical Weekly 07-09

2010-07-09 18:38:00
Jamie Saettele, CMT, Sr. Technical Strategist
Share:

Euro / US Dollar

WT-10-07-09-EURUSD-01

Joel: The market continues to extend gains as it fills out the triggered inverse head & shoulders pattern that was triggered in the previous week. However, our overall bias remains bearish and we would recommend looking to sell into rallies above 1.2800, with any moves above this figure likely to be well capped ahead of 1.2850. Key support now comes in by 1.2620 and a break and close back below this level will also shift the focus back on the downside.
Jamie: I remain of the mind that a top is forming and that the corrective channel will provide resistance. Again, the 100% extension of the initial leg up is at 12765 and intersects with channel resistance on the 13th (next Tuesday). It looks as though the rally from 12480 has taken the form of an ending diagonal. I expect to establish a short position early next week. Dropping below 12550 would suggest that a top is already in place.

WT-10-07-09-EURUSD-02

 

British Pound / US Dollar

WT-10-07-09-GBPUSD-01

Joel: The recent rally in the market has been classed as corrective with the pair looking to carve out a fresh medium-term lower top below 1.5500. Gains have so far stalled out just over 1.5200, and while there is a risk for additional upside towards 1.5300, we do not see the rally extending much beyond. Instead, look for a break back below 1.5080 to help confirm downside bias and accelerate declines towards next support by 1.4870.
Jamie: The GBPUSD has reached parallel channel resistance in what may be a 4th wave rally. The rally is also in 3 waves with wave C relating to wave A by a Fibonacci 1.618. I expect weakness.

WT-10-07-09-GBPUSD-02

 

Australian Dollar / US Dollar

WT-10-07-09-AUDUSD-01

Joel: In the process of retracing the 0.8860-0.8315 move, with the market most recently breaking back above 0.8700 and towards 0.8800. However, the rally is still classed as corrective and we do not see the gains extending much further. Look for any additional upside to be well capped by 0.8800 ahead of the next major drop back below 0.8315. Only a close back above 0.8860 negates and gives reason for pause.
Jamie: There are multiple ways to count the decline from 8865 and subsequent rally. We still could see a push above 8800 (as suggested by the above count) but 8865 is the key level. Trading above 8865 would shift focus to 9130/50 (former support and a 100% extension). Coming under 8565 would suggest that the larger decline has resumed.

WT-10-07-09-AUDUSD-02

 

New Zealand Dollar / US Dollar

WT-10-07-09-NZDUSD-01

Joel: In the process of retracing the 0.7160-0.6795 move, with the market most recently breaking above 0.7100. However, the rally is still classed as corrective and we do not see the gains extending much further. Look for any additional upside to be well capped ahead of 0.7160 ahead of the next major drop back below 0.6795. Only a close above 0.7160 negates and gives reason for concern.
Jamie: The NZDUSD decline from 7160 is a clean 5 wave affair, which confirms the larger downtrend. Expectations are for price to roll over prior to 7165 and for the longer term downtrend to resume.

WT-10-07-09-NZDUSD-02

 

US Dollar / Japanese Yen

WT-10-07-09-USDJPY-01

Joel: Despite the latest choppy directionless trade, our overall outlook remains highly constructive so long as the price remains above 87.00 on a close basis. Look for an eventual push back towards and through 95.00, above which should accelerate gains to next critical topside barriers by 100.00. Thursday’s break back above 88.20 confirms basing prospects and should now accelerate.
Jamie: Everything from the 2009 low appears to be corrective. The 3 wave rally from 8480 is surely corrective, so there is the possibility that the USDJPY continues lower from here and takes out 8480 (which would mean that what was thought to be a b wave triangle would actually be a series of 1st and 2nd waves). There is the possibility that a long term inverse head and shoulders pattern is unfolding (left shoulder at late 2008/early 2009 low). 8770/8800 is short term support.

WT-10-07-09-USDJPY-02

 

US Dollar / Canadian Dollar

WT-10-07-09-USDCAD-01

Joel: The latest rally has stalled out ahead of 1.0700 for now, with the market pulling back into the 1.0400’s thus far. However, our overall outlook remains grossly constructive and we do not see additional setbacks extending much below 1.0400. Instead, we would recommend looking to buy on dips below 1.0400 in anticipation of the next major upside extension beyond 1.0855.
Jamie: The larger C wave rally in the USDCAD should eventually exceed 10866. The decline from 10680 has reached the lower end of the support zone (61.8% retracement and former congestion). I expect that the USDCAD will find a secondary low ahead of 10134….ideally close to the current level.

WT-10-07-09-USDCAD-02

 

US Dollar / Swiss Franc

WT-10-07-09-USDCHF-01

Joel: The intense declines of the past several weeks continue, with the market dropping by some 12 big figures since early June from above 1.1700 down through1.0500 thus far. While daily studies are severely oversold, there has still been no direct sign of a bounce, and the risk from here is for additional weakness below 1.0500 to retest the multi-week platform base by 1.0435. However, as we have outlined, daily studies are dramatically overextended and a major upside reversal cannot be ruled out. Look for a break back above 1.0565 to confirm and accelerate.
Jamie: The USDCHF has declined beneath the 61.8% retracement of the advance from 9916. It remains possible that the rally from 9916 is the first wave of a longer term bull (diagonal with an extended 5th wave). That would also explain the severity of the decline from 11735. Extended 5th waves are often fully retraced. The former 4th wave extreme at 10430 would be strong support (if reached). Daily RSI was recently at its lowest level since November 2007 (the USDCHF bottomed on November 23rd and was 800 pips higher a month later).

WT-10-07-09-USDCHF-02

 

Euro / Japanese Yen

WT-10-07-09-EURJPY-01

Joel: The market now appears to be attempting to carve out a short-term base at a minimum since dropping to fresh 2010 lows by 108.10 in recent trade. However, a break back above 114.15 will be required to take the immediate pressure off of the downside and strengthen the case for a base, while back below 109.00 threatens recovery prospects and opens a retest of the 2010 lows.
Jamie: The EURJPY rally from 10730 is in 3 waves at this point and the price rolled over just shy of where the 2 bull legs would be equal. Equality among waves is characteristic of a correction so there is no evidence at this point to suggest that a major low is in place.

WT-10-07-09-EURJPY-02

 

British Pound / Japanese Yen

WT-10-07-09-GBPJPY-01

Joel: It looks as though a meaningful base has been carved out by 126.75, with the market recovering quite impressively since. The latest pullback off of 136.40 has now been supported ahead of 130.00 and a fresh higher low could be in the process of carving out ahead of the next upside extension beyond 136.40. Only back below 130.00 negates short-term bullish outlook.
Jamie: I continue to favor the triangle interpretation. “The GBPJPY sideways trading over the last month is probably a B wave triangle.” Waves a through d are probably complete and wave e is underway towards support (13185-13225). Once wave e is complete, expectations will be for a terminal thrust in wave C that ends above 13650.

WT-10-07-09-GBPJPY-02

 

Euro / British Pound

WT-10-07-09-EURGBP-01

Joel: Remains locked in an intense downtrend despite the current recovery rally, with the market as of yet unable to establish above 0.8400. Look for another topside failure by 0.8400 ahead of some renewed weakness and a bearish resumption back towards the yearly lows by 0.8065 over the coming weeks. Only a weekly close back above 0.8400 would negate outlook and give reason for concern.
Jamie: The larger EURGBP trend is down towards 7600-7700 (October 2008 low and Fibonacci extension). The rally from 8066 is best counted as a 3 wave advance – potentially wave 4 within the decline from 9153. Look for intraday weakness since price is testing parallel channel resistance.

WT-10-07-09-EURGBP-02

 

WT-10-07-09-TRADES

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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