This week has provided additional evidence that the US dollar has formed an important bottom. The EURUSD, GBPUSD, USDCAD, and USDCHF sport reversal candle patterns from last week and the AUDUSD can be added to taht group this week. A false break from a channel in the USDJPY favors bears and there are possible double tops in the EURJPY and GBPJPY. The Yen patters suggest a return to risk aversion.

EURO / US DOLLAR

Classical Outlook: A bearish weekly close off of the 2009 highs has been followed with a pullback and fresh weekly lower high and lower low. However, price action remains extremely choppy and it remains unclear where we head from here. A break back above 1.4330 will suggest bullish resumption beyond 1.4450, while back under 1.4085 will open the door to a more significant pullback and suggest that a medium-term top is in place. It is worth noting that the 100-Week SMA continues to cap on a weekly close basis.
Elliott Wave Outlook: From last week - the EURUSD and USDCHF failed to test the December 2009 price extremes. The USD Index slightly exceeded its December 2009 low and reversed. This signals a divergence the likes of which we saw at the July 2008 USD bottom. Dropping under 1.4000 confirms the top. The pair is above 1.4000 but downside momentum is building and short term structure favors bears. Sell rallies.

BRITISH POUND / US DOLLAR

Classical Outlook: Good downside follow through this week following a bearish gravestone formation off of the yearly highs by 1.7045. There is now the potential for a weekly double top to play out with a break below the neckline at 1.5985 required to confirm and set up a major top. Below 1.5985 opens a measured move drop back towards 1.5000. However, we still have a ways to drop before this becomes a reality. Above 1.7045 negates.

Elliott Wave Outlook: The thrust from a triangle is most likely complete and the downside is favored. A drop below 1.6388 would also signal a break of trendline support (drawn off of lows in March, April, and August). In the event of a poke above 1.6672, Fibonacci resistance is at 1.6793.

AUSTRALIAN DOLLAR / US DOLLAR

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Classical Outlook: Looking to put in a bearish outside week following 4 consecutive up-weeks resulting in a fresh 2009 high on Friday. Look for the reversal prospects to be confirmed on a break below 0.8180 which will open a deeper drop back towards 0.7700. Only above 0.8500 will negate and give reason for concern.
Elliott Wave Outlook: Last week I wrote that I have been waiting for wave v of C (from .7698) to complete. There are signs, such as momentum considerations (divergence) and the USD Index reversal, that the rally is complete as a diagonal. Coming under .8120 would confirm the top. Although a top can not yet be confirmed, last week weakness supports the call for a top.

NEW ZEALAND DOLLAR / US DOLLAR

Classical Outlook: Overall price action still remains quite constructive with the market putting in yet another weekly higher high and higher low, ascending to fresh 2009 highs by 0.6885 ahead of the latest minor pullbacks. However, we would recommend that bulls consider taking some profits with the price failing to hold above the 100-Week SMA and subject to a more significant reversal in light of broader market price action in favor of the USD.
Elliott Wave Outlook: The NZDUSD has reversed from an area that was resistance back in September 2008. Near term, a diagonal has been unfolding and weakness from just below the diagonal resistance line is early evidence that a top is in place.

US DOLLAR / JAPANESE YEN

Classical Outlook: The previous impressive weekly gains have now been nearly fully negated to keep the broader bearish structure and downtrend off of the 2007 highs intact. Look for a medium-term lower top by 97.80 to be confirmed on a drop back below 91.75. Below 91.75 exposes critical support at 87.15. Above 97.80 negates.
Elliott Wave Outlook: The USDJPY has been fluctuating wildly. After breaking above channel resistance last week, the rally failed and price is back in the channel. In fact, the USDJPY is right at the 200 day SMA. There is no strong directional bias at this point although the false break from the channel is promising for bears.

US DOLLAR / CANADIAN DOLLAR

Classical Outlook: A weekly hammer close has been followed by a very encouraging bullish week, with the market now looking like it has carved out a major base by 1.0630. Look for fresh upside over the coming weeks with a break back above next resistance at 1.1200 to accelerate gains. Any setbacks should now be well supported ahead of 1.0790.
Elliott Wave Outlook: RSI divergence at the recent low and intraday structure suggests that the USDCAD has made an important low and is headed higher in the weeks ahead.

US DOLLAR / SWISS FRANC

Classical Outlook: The market has mounted a slow and steady recovery since posting historic lows below parity in 2008. But for the recovery structure to remain intact, the market needs to hold above the December 2008 1.0410 lows. A 2009 low was recently made by 1.0560 and we look for the latest consolidation to hold above this level ahead of a fresh upside break beyond 1.1025 which offers itself as medium-term resistance. Below 1.0560 concerns.
Elliott Wave Outlook: The USDCHF is in the same position as the EURUSD, but as the inverse. Intraday, there are 5 waves up from 1.0561 and 3 waves down from 1.0888. 5 waves define the trend therefore the upside is favored.

EURO / JAPANESE YEN

Classical Outlook: Very well capped on rallies towards 140.00 with the latest attempts stalling just shy of the 2009 highs by 139.25 and pulling back to put in a bearish reversal week, ending a sequence of 4 consecutive weekly higher lows. As such, we look for more weakness over the coming days which should open an imitate retest of psychological support at 130.00. Above 140.00 negates.
Elliott Wave Outlook: After testing the top of its multi month range, the EURJPY reversed and is currently at the 55 day SMA. There is no structural clarity at this point but conditions favor trading the 127-139 range.

BRITISH POUND / JAPANESE YEN

Classical Outlook: Could be looking set for a major bearish continuation after stalling out by fresh 2009 highs at 163.10. The latest sharp pullback and weekly reversal now bring a potential double top formation into the picture which could now open an initial move back towards neckline support at 146.80. Below 146.80 triggers the double top and open a move back towards the 138.00 area. Above 163.05 negates.
Elliott Wave Outlook: One thing is clear - the rally from below 120 is corrective. RSI divergence at this week's high along with the potential double top paint a bearish picture. Similar to the EURJPY, trade the large range until a confirmed break.

EURO / BRITISH POUND

Classical Outlook: Weekly studies still show plenty of room to run and we look for additional setbacks towards the 0.8000 area over the medium-term. For now, a period of consolidation appears to have set in, with any rallies towards 0.8700-0.8800 to be used as good sell opportunities in anticipation of an eventual bearish continuation.
Elliott Wave Outlook: The structure of the decline since the top just shy of parity is not especially clear, which is the first sign that the pair in question is stuck in some sort of correction. However, the rally off of the low is choppy as well which leaves the EURGBP vulnerable to a drop below .8400. Price is in the middle of a multi-week range right now so near term direction is unclear. Above .87 exposes .8870 and below .84 exposes .8230.

TRADE LIST

*Entry prices for trades that are recommended ‘at market' are listed as the close price on the date published.