The EURUSD may have completed wave i of 5 down.  A correction is underway in wave ii.  There are 2 levels to watch for resistance; 1.2636 (former 4th wave) and 1.2721 (61.8% of 1.2932-1.2386).  These are areas to expect a top and rallies to there would present opportunities to get short against 1.2932.  Long term, the trend remains down as long as price is below 1.2932.         


The larger USDJPY trend is down so strength should be sold.  It is unclear though whether or not the rally from 90.86 is complete.  As long as price remains below 99.52, bearish potential is significant.  However, support from the 61.8% of 90.86-100.60 is a warning that 100.60 could be broken (since 61.8% is a level that tends to hold B waves of zigzags).       


The GBPUSD decline has accelerated and dropped to a new low as expected.  Still confined to a steep channel, Cable remains in an impulse.  I wrote yesterday that “the drop to a new low satisfies minimum expectations for wave 3 of C but additional downside is likely.  Monthly pivot support is at 1.4933.”  Having already dropped 130 pips below 1.4933, there is no sign of a bottom, although a 4th wave (of C correction) will eventually take hold prior to a drop below 1.3680.  


Short term USDCHF structure is unclear but the long term wave count presented in the monthly forecast is bullish.  Higher highs and higher lows since the March low favors bulls as does the break above a line from late 2005.  Round number resistance is at 1.20 and the August 2007 high is the next level of chart resistance just above 1.22.   


Testing resistance just shy of 1.24, bulls may wish to lighten up.  Still, there is no change to the call for a push above 1.3025 prior to formation of a more important top.


There remains potential for a large recovery back to the mid .70s given the 5 wave drop from the top (waves a and b of an a-b-c correction would be close to complete).  Until structure clears up, it is best to stand aside.


The implications from the short term head and shoulders pattern are bearish as long as price is below .59 but there remains the possibility of a larger recovery in a C wave to above .6137 (same as AUDUSD structure).  


Jamie Saettele writes Forex Technicals: The Day Ahead, Monday-Thursday (published at 6 pm EST), Daily Technicals every weekday morning (9 am EST), COT analysis (published Monday mornings), and analysis of currency crosses throughout the week.  He is also the author of Sentiment in the Forex Market.


Contact at jsaettele@dailyfx.com