British Pound Breaks Out

Tue, 05 May 2009 10:32:00 -0400

By Jamie Saettele, Senior Currency Strategist

-EURUSD closes above channel resistance
-GBPUSD breaks through
-AUDUSD nearing objective
-NZDUSD basing for a break as well?
-USDJPY potential head and shoulders


Euro / US Dollar


The push above channel resistance indicates that the EURUSD corrective advance from 1.2510 is not yet complete.  In fact, recent developments suggest a rally through 1.3742 and possibly as high as 1.4150-1.4200 (61.8% of decline from 1.4723 and 100% extension of 1.2510-1.3742).  Staying above 1.3190 keeps this outlook intact.

British Pound / US Dollar


The only statement that I can make with a high degree of certainty is that the rally from 1.35 is a larger 4th wave (corrective) and that it is highly probable that 1.3500 will be broken later this year.  BUT, as is the case with the EURUSD, a larger advance seems likely prior to the next leg lower.  Staying above 1.4703 keeps bulls in control and Cable on a path towards 1.5728 (200 day SMA near there as well). 

Australian Dollar / US Dollar


The correction from the October low is still underway.  The rally from .6953 is wave v of C and an objective is .7630 (which is where wave v of C would equal wave i of C).  This is close to the 50% of the decline from .9822.  Staying above .7228 keeps bulls in control. 

New Zealand Dollar / US Dollar


The head and shoulders ‘look’ is still there but the decline from .5987 is in 3 waves, which warns of additional upside potential.  Also, the right shoulder is consuming too much time.  Remaining above .5624 keeps the NZDUSD on a path towards higher prices.

US Dollar / Japanese Yen


The long term trend remains down and I expect a resumption of that trend although there is near term upside potential.  A potential head and shoulders top that is evident.  Coming back beneath the 200 day SMA would begin to suggest that the decline has resumed. 

US Dollar / Canadian Dollar


A larger USDCAD decline is underway towards 1.1359 and perhaps even lower.  Weakness, which is accelerating, indicates that 5 waves from .9055 are complete at 1.3068.  1.1980 is short term resistance.

US Dollar / Swiss Franc


The USDCHF decline is also likely to extend.  1.0925 is the 61.8% of the advance from 1.0367 and potential support.  Staying below 1.1606 keeps the pair on a path lower.  Short term resistance is at 1.1450/75.

Jamie Saettele publishes Daily Technicals every weekday morning (930 am EST), COT analysis (published Monday mornings), technical analysis of currency crosses throughout the week (EUR on Tuesday, JPY on Wednesday, GBP on Thursday, AUD on Friday), and the DFX Trend Index every day after the NY close.  He is also the author of Sentiment in the Forex Market.
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