Dollar / Yen Enters Fibonacci Resistance Zone

Thu, 26 Feb 2009 09:10:18 -0500

By Jamie Saettele, Senior Currency Strategist

-EURUSD maintains range
-USDJPY resistance from 98-101; 100.50-101 of particular interest
-GBPUSD tumbles but holds above 1.4150 for now
-USDCHF bearish against 1.19
-AUDUSD and NZDUSD mark time


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).  There is risk of a drop below 1.2660 before the larger rally.  In this instance, there would be a high reward/risk long opportunity.  Even at current price, the ratio is skewed in favor of bulls.

US Dollar / Japanese Yen


The USDJPY has entered the resistance zone defined by Fibonacci retracements from 98 to 101.  Longer term structurally, I still view strength as corrective...this will not change unless the advance from 87.09 turns into an impulse.  Expect at least a short term top (week +) in the 98.19-101 zone.  I’ll look to position short in this zone for a drop to 95 once there are signs of weakness

British Pound / US Dollar


The GBPUSD has held above 1.4150, barely.  The count on the daily, which shows 5 waves down from the 2007 high, indicates that risk of a sharp advance is high.  Coming under 1.4150 would likely give way to a break of 1.4090, which would expose measured support at 1.38.

US Dollar / Swiss Franc


Expectations are for the USDCHF to decline to at least 1.13.  This is where the ending diagonal began, which are usually fully retraced.

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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