The euro traded in a tight range 200 pip range this week against the US dollar and ended little changed. The 4 week range has tightened and breakout levels are 1.4450 and 1.4040. Of note from a technical perspective is the GBPJPY support line break. Perhaps this development signals broader US dollar and Yen strength in the near future.

EURO / US DOLLAR

001FX8-28-09A
Outlook: Until a break above 1.4452 or below 1.4044, there is no directional bias. A rally above the range high opens up the door for an extension to the December 2008 high of 1.4720. A potential target would be 1.5245, which is the 78.6% retracement of the decline from above 1.6000. This level intersects with potential trendline resistance at the end of September. Coming under 1.4044 would suggest that an important top is in place and that the longer term bear that began last summer has resumed.

BRITISH POUND / US DOLLAR

001FX8-28-09C
Outlook: If a 4th wave triangle ended at the end of July, then the subsequent rally to 1.7050 was a terminal thrust and a significant top is in place. A drop below 1.5800 is required in order to confirm hat a top is in place however. Dropping below 1.5800 exposes the 50% retracement of the rally from the January low at 1.5273 (200 day SMA is nearby). Trading above 1.6629 would be viewed as a bullish development in the pattern. Targets in the event of a break higher are round number resistance at 1.7500 and Fibonacci resistance at 1.8238 (intersects with potential trendline resistance at the end of September).

AUSTRALIAN DOLLAR / US DOLLAR

001FX8-28-09E
Outlook: As the AUDUSD nears its 2009 high, the bearish short term pattern is called into question. Potential for a breakout exists as long as the AUDUSD is above .8212. A potential target is the 78.6% of the decline from .9856, just above .9000. This level intersects potential trendline resistance on the same day that the EURUSD resistance line intersects its 78.6% retracement (end of September). A drop below .8151 would negate any bullish potential and open up a move to .7700.

NEW ZEALAND DOLLAR / US DOLLAR

001FX8-28-09G
Outlook: The NZDUSD remains within the well defined upward sloping channel. In the event of a blow-off - levels of interest are .7206 (61.8% extension of .4890-.6601/.6149) and .7507 (78.6% retracement of decline from .8219). Coming under .6596 would negate the blow-off top scenario and also mean that channel support (since March) has been broken. Divergence at multiple degrees of trend favors bears.

US DOLLAR / JAPANESE YEN

001FX8-28-09I
Outlook: After a false break through channel resistance, the USDJPY is back below both the 55 and 200 day moving averages. The pair has failed at the 38.2% of the decline from 97.81. 93.00 is potential support and only a break below 91.73 would eliminate the larger range and give scope to a test of 87.00 and legitimate breakdown.

US DOLLAR / CANADIAN DOLLAR

001FX8-28-09K
Outlook: The USDCAD is similar to the EURUSD in that until the pair breaks its range, there is no directional bias. It is possible that a b wave (wave b of y within a complex correction w-x-y from 1.3068) is unfolding from 1.0631. Wave b could take the form of a triangle or flat at this point so even a rally above 1.1130 does not necessarily give bulls the green light (because the USDCAD would then be at risk of declining in a c wave towards 1.0317).

US DOLLAR / SWISS FRANC

001FX8-28-09M
Outlook: Failure to stay above 1.0561 suggests that the USDCHF is headed for a test of the December 2008 low at 1.0367. However, the decline has failed to accelerate. A rally above channel resistance would confirm a low.

EURO / JAPANESE YEN

001FX8-28-09O
Outlook: Since topping in June at 139.17, the EURJPY has traded in a wide range (approx. 139-127). Favor the downside but beware of potential support from a Fibonacci extension at 129.50. Additional weakness would expose the bottom of the range / 200 day SMA near 127.00. Also of note is that price action since March has carved out a potential head and shoulders top but a drop below 124.37 would be required in order to eliminate a bullish triangle count in which a terminal thrust would carry the EURJPY into the mid 1.40s.

BRITISH POUND / JAPANESE YEN

001FX8-28-09Q
Outlook: There is little doubt that the rally from the January low is corrective. The advance is choppy and the waves unclear (lack of structural clarity signals itself that the pattern is corrective). Trendline support was broken in early July and the subsequent GBPJPY rally led to a piercing of the June high. Price has dropped below yet another support line this past week, which exposes the July low of 146.74 (with the 200 day SMA below there at 145.00).

EURO / BRITISH POUND

001FX8-28-09S
Outlook: Near term, there is potential resistance from the 6/5 high at .8870 - which intersects with a potential trendline on Friday. Setbacks may find support at .8700 (former resistance). Longer term implications from the 3 wave decline are bullish.

TRADE LIST

001FX8-28-09U

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