Euro Failure / Australian Dollar Risk of Reversal is High



Tue, 19 May 2009 09:42:16 -0400



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




-EURUSD failing at top of range
-GBPUSD nearing end of corrective rally
-AUDUSD at risk of top and reversal
-NZDUSD also
-USDJPY triangle count still in play
-USDCHF bullish against low

Euro / US Dollar
05-18-09asiantechs01

As of this morning, my bias has changed from bull to flat. Since the March top at 1.3742, the EURUSD has traded down to 1.2886 and most recently back above 1.3700. Neither the decline nor the advance are impulses therefore a larger correction is underway. One such count, which I have highlighted in recent days, is a triangle. IF a triangle is unfolding, then wave c of the triangle will begin now and result in a drop down to about 1.3000. An alternate treats the advance from 1.2886 as wave Y of a complex correction from 1.2510. Under this count, 1.3742 would be exceeded prior to a top and reversal.


British Pound / US Dollar

05-18-09asiantechs02

Having exceeded 1.5356, the short term bearish GBPUSD bearish count was eliminated. There is no change to the bigger picture pattern in which wave 4 within the 5 wave decline from the 2007 high is nearing completion. Watch the resistance line drawn off of the 3/24 and 4/6 highs as well as the 200 day SMA as levels that may lead to a reversal. If near term patterns indicate with a high probability that a top is already in place, then I’ll mention as much with an alert at DailyFX.

Australian Dollar / US Dollar
05-18-09asiantechs03

As of this morning, my bias has changed from bull to flat and a I anticipate going short soon. The AUDUSD made a new high as expected. Wave v of C (and therefore wave C) as well as the entire rally from the October low is close to complete (if not already complete). The risk of a top and reversal is high.

New Zealand Dollar / US Dollar
05-18-09asiantechs04

The NZDUSD is lagging the AUDUSD but my bias has changed from bullish to flat here as well. That the NZDUSD has not made a new high and the AUDUSD has may mark a non-confirmation…a divergence. There is divergence as well with daily RSI. Structurally, the NZDUSD rally from .5831 may be a truncated 5th wave (wave v of C in this case).

US Dollar / Japanese Yen
05-18-09asiantechs05

I wrote last week though that “I want to urge caution as the pair approaches 93.50. The circled area could still be a triangle in the X wave position. With this in mind, bears may want to lighten up.” The rally from 94.55 is in 5 waves and confirms that a larger advance is underway, perhaps as part of the triangle. My bias has changed from bearish to flat. Short term support is at 95.60.

US Dollar / Canadian Dollar
05-18-09asiantechs06
I wrote the last few days that “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.” A top may be in place as the rally from 1.1475 is overlapping (corrective) and the USDCAD reversed from the former 4th wave extreme (an Elliott guideline). However, given that the rally from 1.1475 is probable a 4th wave, a larger correction is possible. 4th waves are often drawn out affairs (complex).

US Dollar / Swiss Franc
05-18-09asiantechs07

Whereas the EURUSD has yet to exceed its March high of 1.3742, the USDCHF has already dropped below its March low of 1.1157. In other words, minimum expectations have been met for wave Y. So, it is possible that a low is in place. As such, my bias has changed from flat to bullish. Confidence is not extremely high but is high enough given the reward / risk at this point.

05-18-09asiantechspivots

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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