Japanese Yen Freefalls
• Euro Finds Little Relief
• Japanese Yen Loses 120
• British Pound Holding Trendline Support
• Swiss Franc Blows By 61.8%
• Canadian Dollar Ranging
• Australian Dollar False Break
• New Zealand Dollar Constructive
EURUSD — Standing back and taking a look at the daily chart, it looks more and more like the decline from 1.3296 is a third wave in a 5 wave bearish sequence rather than a C wave in a 3 wave corrective sequence. The point where the decline from 1.3296 would have equaled the 1.3367-1.3051 decline was 1.2980. Yesterday’s low was 50 pips lower, thus an extended leg lower may be in the works. If this is the case, then bearish targets are 1.2861 and 1.2787. These points are where the decline from 1.3296 is 1.382 and 1.618 x the 1.3367-1.3051 decline. This is also a previous congestion area. If 1.2930 holds, then Fibonacci resistance comes in at 1.3016 (23.6) and 1.3069 (38.2).
USDJPY — The USDJPY has broken above the neckline from the 13 month inverse head and shoulders pattern. The door is now open for an assault on the 125.00 figure and ultimately a measured objective at 128.67 — which is where the advance from 108.96 would equal the advance from 101.67 to 121.38. Daily RSI is in overbought so managing risk is key here for longs. On the other hand, RSI just entering extreme territory could mark the beginning of a much stronger move. Support is former resistance at 119.67.
GBPUSD — Cable is little changed as the pair continues to look far more constructive than the EURUSD. The pair has held above trendline support drawn off of the 10/11 and 11/15 lows. The rally from 1.9260 to 1.9455 is in 5 waves and the dip to 1.9341 in 3. The pair has turned up in what is either a 3 or a C wave that should challenge 1.9536 (which is where the price distance from 1.9341 would equal the 1.9260-1.9455 rally). The 61.8% of 1.9749-1.9260 at 1.9562 reinforces resistance there. 1.9260 needs to hold for the bullish construction to remain. If 1.9260 gives way, then the 11/10 high at 1.9178 is the next support area.
USDCHF — The USDCHF below through the 61.8% of 1.2768-1.1878 yesterday and reached a high of 1.2477. Still, on the 240 minute chart, the pair is breaking below a supporting trendline that began on January 2. The pair did close above the 200 day SMA two days ago for the first time since late October but there is often whipsaw type action around the 200 day SMA before a trend is in place. Expect the pair to cross the long term moving average multiple times within the next few weeks before finding a sustainable trend.
USDCAD — The USDCAD rally continues to mark time as the pair has stalled near the April 2006 high of 1.1771. Since 01/05, the pair has traced out a small triangle. Triangles usually end in a thrust in the direction of the trend (in this case?up) but the move is a terminal event. Thus, a thrust higher (if it happens) eventually should give way to a turn lower. A break below 1.1719 suggests that a turn lower is already in the works.
AUDUSD — The AUDUSD closed below the all-important .7778 (12/15 low) but the break lower proved false as the pair has rallied today to take out the previous two day’s highs. Bullish pivots to watch are .7878 (12/20) high, .7929 (12/8 high) and ultimately .7979 (01/03 high). False breakouts often lead to dramatic reversals in the other direction, which is what we may see here. .7759 (yesterday’s low) is critical support for the bullish case.
NZDUSD — Kiwi has stemmed its decline and the pair remains constructive as the rally from the .6840 low to .6938 is most likely wave A and the decline to .6859 wave B. Wave B retracing 78.6% of wave A is typical of a flat pattern. If a flat is unfolding, then Kiwi strength should persist until at least wave C equals wave A — which in this case would be .6956. This level is just below the 50% reracement of .7096-.6840 at .6968.
Kathy Lien is the Chief Currency Strategist at
Forex Capital Markets. Kathy is responsible for providing research and analysis
for DailyFX, including technical and fundamental research reports, market
commentaries and trading strategies. A seasoned FX analyst and trader, prior to
joining FXCM, Kathy was an Associate at JPMorgan Chase where she worked in Cross
Markets and Foreign Exchange Trading.