British Pound Consolidates; Position for Rally at Short Term Support

Tue, 24 Feb 2009 08:31:46 -0500

By Jamie Saettele, Senior Currency Strategist

-EURUSD consolidating; larger rally expected
-USDJPY surges through 38.2% retracement
-GBPUSD support at 1.4340-1.44
-USDCHF headed to at least 1.13
-USDCAD calm before the storm
-AUDUSD and NZDUSD stay above lows; rallies coming?

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Euro / US Dollar


The break from the triangle and decline to 1.25 is viewed as wave 5 within the 5 wave decline from 1.47.  A corrective advance over the next month (at least) is expected.  Initial resistance is not until 1.33 (former chart resistance and 38.2% of decline from 1.4723).

US Dollar / Japanese Yen


The USDJPY has rallied through the 38.2% of 110.71-87.09 and focus shifts to the 50% at 98.19.  Daily RSI is above 70.  RSI can stay above 70 for days or longer before any sort of weakness occurs.  The very long term trend is still viewed as down and the USDJPY is still expected to drop to an all-time low.  As of now though, there is no evidence of a short term top.  The 98.19-101 zone may provide resistance for that top.

British Pound / US Dollar


The GBPUSD is in no man’s land between 1.4990 and 1.4090.  Based on the EURUSD count, which is much clearer, strength seems more probable at this point.  1.4340-1.44 is support from Fibonacci.  Look to position long in this zone against 1.4148, for an eventual break above 1.4665.  

US Dollar / Swiss Franc


I wrote Friday that “this advance is nearing completion in an ending diagonal from 1.1312.  Watch the upper end of the diagonal line for resistance.  The line crosses roughly 1.1920 today and increases about 20 pips per day.”  The USDCHF fell just short of the upper diagonal line but the sharp reversal is strong evidence that the advance is complete.  The USDCHF is expected to reach at least 1.13.

US Dollar / Canadian Dollar


As I’ve favored the last few weeks, the triangle that has been underway since October is probably complete at 1.2020.  The breakout scenario is favored as long as price is above 1.2278.  Coming under there would require a reassessment of the short term pattern.

Australian Dollar / US Dollar


I am zooming out to the daily in order to highlight the long term bearish implications from the 5 wave drop and subsequent 3 wave rally (since July 2008).  The corrective rally from the October 2008 low ended right at the former 4th wave, which is typical of corrections.  The pattern since the October low can also be categorized as a head and shoulders continuation.  Coming under the February 2 low at .6245 would mark a break of the neckline and focus would then shift to the October low of .60.  A word of warning to bears though, staying above .6245 keeps the larger range intact and there is risk of a rally that exceeds .6857 prior to resumption of the downtrend.

New Zealand Dollar / US Dollar


The NZDUSD has declined impulsively (5 waves) since its 2008 high and that decline was followed by a 3 wave rally (from the November low).  The drop from .6090 is viewed as beginning of the next bear leg.  Price may exceed .5454 in order to complete a corrective advance from below .50 prior to resumption of the larger bear trend.

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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