British Pound Pulls Back; Structure Bullish above 1.4579

Thu, 16 Apr 2009 10:12:50 -0400

By Jamie Saettele, Senior Currency Strategist

-EURUSD range continues
-GBPUSD support at 1.4765
-AUDUSD tests support line
-USDCAD resistance at 1.2190


Euro / US Dollar


“The fractal nature of the market has been on full display in the EURUSD since the top last year at 1.60.  There are 5 waves down and 3 waves up at 2 degrees of trend.  The ‘1-2’ down from 1.4723 is waves 1 and 2 of the next 5 wave decline.”  Since 1.3742, the EURUSD has made lower highs and lower (albeit slightly) lows.  There is no reason to alter the bearish outlook.  It is unclear if Monday’s high (1.3396) will remain intact.  A push above there exposes potential trendline resistance just shy of 1.35.  The critical level for bears though is 1.3586.  Coming under 1.3086 would open up the floodgates.

British Pound / US Dollar


I wrote yesterday that “with price so close to the top of the range, confidence is low in the triangle at this point.  Trading above 1.4962 could lead to a strong break out rally.  This is at odds with the bearish EURUSD structure but markets do tricky things.”  We can eliminate the triangle count as the GBPUSD exceeded 1.4990.  This favors a strong advance, possibly as high as 1.60.  Price needs to remain above 1.4579 in order for the bullish structure to hold.  Short term support from Fibonacci is at 1.4765.

Australian Dollar / US Dollar


As mentioned recently, “a push above .7275 could complete a complex correction from .60.  Either way, I am looking to go short.”  The rally through .7275 exposes the 100% extension of .6005-.7275 at .7566.  A top could form prior to that level but there is no confirmation of a top yet.  A daily close beneath the support line that has held since March would signal that a top is most likely in place.

New Zealand Dollar / US Dollar


There are 5 waves down from that .6090, indicating that the long term trend remains down.  An expanded flat correction has unfolded from the February 2 low (.4958).  Wave c is in 5 waves, RSI is divergent at the high and has rolled over from overbought territory on the daily.  Price ideally remains below .5939.

US Dollar / Japanese Yen


The 61.8% of 110.71-87.09 at 101 has held as USDJPY resistance.  The next level of potential resistance is a resistance line drawn off of the July 2007 and August 2008 highs.  That line is at 103.55 this week and decreases about 20 pips per week.  However, with price trading below a parallel support line AND COT data warning of a sentiment extreme, it is worth punting on a short against 100.76.  The long term trend remains down and I am looking for a resumption of that trend.  The downside potential is significant.

US Dollar / Canadian Dollar


The drop beneath 1.2020 most likely confirms that 5 waves are complete at 1.3068 and that a deeper correction of the advance from .9055 is underway.  The strategy will be to sell rallies and former support at 1.2190 is now potential resistance.  The next support level is the 200 day SMA (in red).

US Dollar / Swiss Franc


Like the EURUSD, the USDCHF may have resumed its longer term trend towards USD strength.  This is my working assumption as long as price is above 1.1300.   

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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