Dollar / Yen Nears Neckline; Euro Closes in On March Top



Tue, 12 May 2009 09:57:14 -0400



By Jamie Saettele, Senior Currency Strategist strategist@dailyfx.com




-EURUSD expected to take out 1.3742
-GBPUSD 4th wave remains underway
-AUDUSD and NZDUSD at risk of topping
-USDJPY nears head and shoulders neckline
-USDCAD should rally towards resistance

2009-05-12_tech_1

Euro / US Dollar

2009-05-12_tech_eur

A push above 1.3742 is still required to satisfy the minimum requirement for wave Y, at which time I will expect a top and reversal (objectives are at points from 1.3800 to 1.4200).  Yesterday, I wrote that “being a complex correction, I am not positive as to the structure of the rally from 1.2886.  However, one possible count is an a-b-c flat (3-triangle-5) with wave b as a triangle.”  This count is on track but the EURUSD could dip below 1.3556 before continuing its advance.  In such a scenario, the rally from 1.3251 would be wave i of c of Y.  A small second wave would test Fibonacci support, which is from 1.3430-1.3540.  It is also possible that the EURUSD advances above 1.3742 while remaining above 1.3556 in an extended 5th wave.  There are myriad possibilities but the bottom line is that the rally will not be complete until price pushes above 1.3742 and only a drop below 1.3251 would suggest that a top is in place.  On another note, the time to go short is drawing near.    

British Pound / US Dollar

2009-05-12_tech_gbp

Yesterday, I advocated for a short against 1.5270.  That decision did not pan out as the GBPUSD has continued higher.  Wave 4 within the 5 wave decline from the 2007 high (2.1160) remains underway.  1.5735, the confluence of the 38.2% of the decline from 2.0162 / December 2008 high, seems a likely target.  This level intersects a resistance line at the end of May.  Wave structure is bullish against 1.5065 and there is potential short term support at 1.5200. Strategically, I prefer to wait for an opportunity to short the end of wave 4; probably later this month. 

Australian Dollar / US Dollar

2009-05-12_tech_aud

The rally from .6953 is wave v of C and the objective at .7630 has already been reached (which is where wave v of C would equal wave i of C).  The 50% retracement of the decline from .9822 at .7693 is giving bulls fits for now but one more high seems likely this week.  Higher RSI on the 240 minute chart suggests that the top is not yet in place (tops almost always occur with momentum divergence).  Watch the top of the short term Elliott channel for resistance after the AUDUSD breaks to a new high.  I expect a short opportunity soon.

New Zealand Dollar / US Dollar

2009-05-12_tech_nzd

Likewise, a new high is likely in the NZDUSD this week.  Wave structure along with the RSI condition explained in the AUDUSD analysis suggests as much.  I wrote yesterday that “the drop from .6132 is a 4th wave that should find support near .5890-.5930.  This zone is defined by the price extreme of the 4th wave of one less degree (Elliott guideline) and the 38.2% retracement of the rally from .5624 (a 3rd wave rally).”  The Kiwi found support in the center of this zone so expect a new high soon.  In the above count, I am treating wave 1 as a leading diagonal.  Watch the Elliott channel for resistance on a break to a new high.  Like the AUDUSD, I anticipate a short opportunity soon.

US Dollar / Japanese Yen

2009-05-12_tech_jpy

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 is evident.  Near term, there is risk of a corrective rally back to 97.85 or so.  Such as scenario would present a bearish opportunity for those not already short. 

US Dollar / Canadian Dollar

2009-05-12_tech_cad

Near term, 5 waves down from 1.2510 are probably complete so a correction, back to at least 1.1768 (former 4th wave price extreme) is expected.  As the correction plays out this week, I’ll look to identify the top.    

US Dollar / Swiss Franc

2009-05-12_tech_chf

The USDCHF decline should extend a bit lower.  1.0925 is the 61.8% of the advance from 1.0367 and potential support.  Like the EURUSD, there is potential for a countertrend move (a rally in this case) to short term Fibonacci zone (1.1164-1.1262).  Only a push through 1.1423 would suggest that a bottom is in place. 

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.
 
Please send comments about this report to jsaettele@dailyfx.com


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