Euro Loses 1.27; Dollar Breaking out Against Canadian Counterpart

Tue, 17 Feb 2009 08:22:42 -0500

By Jamie Saettele, Senior Currency Strategist

-EURUSD 1.27 gives way; terminal thrust from triangle
-GBPUSD short term head and shoulders top
-USDCHF ending diagonal
-USDCAD breaking out?
-AUDUSD and NZDUSD; little confidence in upside


Euro / US Dollar


I wrote yesterday that “the bottom line is that a corrective advance is due soon.  Whether or not 1.27 is broken before the advance begins is another question.  Dropping below 1.27 would complete a small 5th wave in a terminal thrust from a triangle.  Bigger picture, the next leg of the multi year bear is underway from 1.47.  A countertrend rally is expected and initial resistance is at 1.33.”  1.27 broke, the floodgates opened, and price is now below 1.26.  Chart support is not until the October low at 1.2327.  There is measured support at 1.2378; which is the 161.8% extension of 1.3077-1.2719/1.2947.  

US Dollar / Japanese Yen


As suggested recently, it is likely that either a triangle or a flat is unfolding from the December low at 87.09.  I say this because both the advance from 87.09 and decline from 94.67 are in 3 waves.  The subwaves of triangles and flats are 3 wave affairs.  Near term structure is bullish as long as price is above 89.68, which keeps the series of higher lows intact.  Since it is possible that a triangle is unfolding, it is best to take profits at this point.  There is potential short term support at 91.12.    

British Pound / US Dollar


The rally from 1.35 is in just 3 waves (with the 2 up legs roughly equal…a common trait among corrections) and the decline from 1.4990 may be the next down leg in the long term bear.  There is the chance that 1.4609 is the top of either a b wave or small 2nd wave within a bear cycle from 1.4990.  A head and shoulders top is now visible, which favors bears as long as price is below 1.4609. 

US Dollar / Swiss Franc


The drop from 1.2303 is an impulse (5 waves), but the drop may be the end of a decline rather than the beginning (a C wave).  The decline would have completed an expanded flat at 1.0367.  This level serves as the secondary low in a longer term bull cycle from .9634.  The rally from 1.0367 is the beginning of the next long term bull leg.  Near term, 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 1.1880 tomorrow. 

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.  Price has rallied above the upper triangle line today, which warns of a break above 1.2770 and then 1.3025.  Risk for bulls can be moved to 1.2278.

Australian Dollar / US Dollar


Staying above .6245 keeps the short term bull count on track in which the AUDUSD is working higher in order to complete a triangle or flat above .7275.  If this outlook is correct, then the AUDUSD should form a low near current price (61.8% of rally from .6245).  The objective is above .6857 at minimum (in case of a larger triangle) and possibly .7275 (in case of a larger flat).  Confidence is low.

New Zealand Dollar / US Dollar


The NZDUSD drop from .5454 is viewed as wave b in an a-b-c corrective advance from .4958. A c wave is expected to exceed .5454 and challenge resistance neat the .56 area over the next several weeks.  The short term trend is bullish as long as price is above .4958.  Confidence is low.  



Jamie Saettele writes Daily Technicals every weekday morning (930-10 am EST), COT analysis (published Monday mornings), and analysis of currency crosses throughout the week.  He is also the author of Sentiment in the Forex Market.


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