Euro Tests Support; Make or Break Time

Thu, 12 Feb 2009 10:34:53 -0500

By Jamie Saettele, Senior Currency Strategist

-EURUSD approaches 1.27...lower end of recent range
-USDJPY holding 21 day SMA and short term support line
-GBPUSD RSI divergence on hourly
-USDCAD bullish break above 1.2536
-AUDUSD and NZDUSD holding Fibonacci support...for now


Euro / US Dollar


The EURUSD is pressuring 1.28…if 1.27 breaks, then I’ll have to reassess near term potential.  Until that happens, risk is to the upside.  “The decline from 1.47 is in 5 waves.  This does strongly argue that the larger trend is still down but a corrective rally is expected prior to the next leg lower.  Chart resistance does not begin until 1.33 and Fibonacci resistance does not begin until 1.3430.  Near term, the series of higher highs and higher lows since 1.27 is bullish.”


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.  There is support from the 21 day SMA as well as a short term support line drawn off of the January 1 and February 3 lows.  Near term structure is bullish as long as price is above 88.55, which keeps the series of higher lows intact.


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 may be the next down leg in the ongoing bear.  The risk of a short term bottom and rally is increasing with each tick lower.  There is RSI divergence on the hourly and the indicator has increased from oversold territory.  There is also potential support at 1.4050.  There is an extremely bearish count in which the GBPUSD is in a 3rd wave down from 1.4557. 


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.  Still, weakness is expected near term to at least 1.1312.  The 200 day SMA is just above 1.10.  I wrote yesterday that “over the next several days, the USDCHF may complete an ending diagonal from 1.1312 that will give way to weakness.”  That diagonal is likely complete at 1.1787 and the USDCHF is expected to drop to mentioned support.  Short term resistance is the 1.1625/75 zone.


US Dollar / Canadian Dollar


A triangle has been underway since October and serves as a 4th wave correction.  The break from this triangle should be violent.  Recent price action suggests that the triangle may be complete at 1.2020.  Staying above 1.2123 keeps the triangle bullish breakout scenario intact.  Short term support is in the 1.2380-1.2280 zone.  A rally above 1.2536 warrants a bullish bias in preparation for the breakout.


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).


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. 

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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