Euro Preparing to Launch

Thu, 29 Jan 2009 09:29:26 -0500

By Jamie Saettele, Senior Currency Strategist

-euro / dollar finds support at Fibonacci / former resistance
-GBPUSD secondary low at 1.5068?
-USDCAD nearing triangle completion
-AUDUSD and NZDUSD to work higher



I wrote yesterday that “I favor the count that treats the decline from 1.3333 and rally from 1.3116 as waves a and b of a flat.  Wave c would be underway now and end below 1.3116 prior to the resumption of the uptrend in wave 3.”  Wave c (and 2) may be complete at 1.3025, just below the 50% retracement of the advance from 1.2763 (1/23 high is at 1.3040).  To review; 5 waves up from 1.2763 indicate that the larger trend has turned up.  A drop below 1.3025 would not change the bullish bias.


The USDJPY is quiet but the pair is probably preparing for a rally through 91.33.  Expect the double bottom just above 87 to hold.  Structurally, a triangle or flat could be unfolding from the December low at 87.09.  Under this count, the pair would head higher in wave C of the pattern.  The larger trend is still viewed as down.


5 waves up from 1.35 and the rally above 1.4350 suggest that the larger GBPUSD trend has turned up.  I wrote yesterday that “a decline, albeit in corrective fashion, is expected to reach at least 1.4024.”  The drop stopped just shy of that level, at 1.4068.  Similar to the EURUSD pattern, this level may be the secondary low (low of wave 2 or B) in a larger bull trend.


The next level of USDCHF measured resistance is where wave c of B would equal wave a of B; at 1.1822.  However, it is possible that a wave B top is in place now.  Those willing to take the risk can establish shorts against 1.2303, targeting a drop below 1.0367 over the next few months.  The decline from 1.1720 is promising for bears (can be counted as an impulse).


“The USDCAD should continue lower in wave e in order to complete the triangle that began in late October 2008.  Short term resistance is at 1.24.  The safest strategy is to wait for wave e to end before attempting a long position (maybe later this week?) against 1.1459 for a move upwards of 1.40.”  Near term, a drop below 1.2020 could complete wave e as a triple zigzag.  I’ll look to identify the bottom so be sure to check the alert box at dailyfx.


The rally from .6534 and decline from .6846 could be waves a and b of an expanded flat.  Under a flat count, wave c would exceed .6846 before a larger decline continues.  Short term structure is bullish as long as price is above .6491. 


A flat (although not of the expanded variety) is also probably underway in the NZDUSD.  Exceeding .5380 may complete the correction from .5164.  There is potential resistance near .5550.

Jamie Saettele writes Forex Technicals: The Day Ahead, Monday-Thursday (published at 6 pm EST), Daily Technicals every weekday morning (9 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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