Major Currency Pairs at Important Levels
• Euro Remains Vulnerable
• Japanese Yen Tests 2005 High
• British Pound 5 Waves Up
• Swiss Franc Gets Pounded
• Canadian Dollar Reaching for 1.1800
• Australian Dollar Various Scenarios
• New Zealand Dollar Bearish Flag
EURUSD — The EURUSD may be forming a base from which to work higher in the short term. We maintain that the decline from 1.3296 is impulsive and the fact that we can count 5 waves from 1.1640 to 1.3367 favors a major turn lower. A break below 1.2865 targets the next bearish target at 1.2708 (38.2% of 1.1640-1.3367). The 12/18 low at 1.3051 is in-between the 38.2% and 50% fibos of 1.3296-1.2965 (1.3029-1.3080). This area should be solid resistance.
USDJPY — We still maintain our position regarding the longer term implications from the 13 month inverse head and shoulders pattern. A measured objective is at 128.67 — which is where the advance from 108.96 would equal the advance from 101.67 to 121.38. The pair has exceeded 121.38 today (121.44 intraday high as of this writing). While RSI is above 70, strong market moves can leave oscillators extreme for quite some time. Looking at the 240 minute chart, there are 5 waves up from 117.97, so a corrective setback is reasonable. The 38.2% of 117.97-121.44 is at 120.12, which is also just above the 4th wave extreme of one lesser degree at 120.05. This measurement is only valid of course if 121.44 holds.
GBPUSD — We focused last week on how much more constructive Cable was compared to the EURUSD. The pair has turned up in what looks like an extended 3rd of the 5th wave to complete the bullish sequence from 1.8515 (and the bullish sequence of one larger degree from 1.7046). Thus, price is expected to exceed 1.9846 before a major correction takes place. In the short term, price has traced out 5 waves from 1.9315 (the preferred count has this as the 3rd of the 5th). The pair has turned down from 1.9777 in what is likely a 4th wave correction. The 38.2% of 1.9315-1.9777 is at 1.6901, which also is just above the 4th wave extreme of one lesser degree at 1.9589. Traditional technical tools also favor a setback — with 240 minute RSI declining from above 70. In summary, it looks like we can expect a correction to near the 1.9600 figure followed by a rally through 1.9846 that would complete a 5 wave bullish sequence from 1.7046.
USDCHF — The USDCHF has turned down from very close to where the 1.2110-1.2526 advance would equal the 1.1878-1.2271 advance. Equal legs are indicative of corrections and the proximity of 1.2526 skews risk to the downside. If 1.2526 is exceeded this week, then the impulsive numbered count would be preferred and focus would switch to the 138.2% and 161.8% extensions of 1.1878-1.2271 / 1.2110 at 1.2653/1.2746. Initial support is at the 38.2% of 1.2110-1.2526 at 1.2369. Daily CCI has rolled over from above 100 on the daily. This often occurs prior to a decline.
USDCAD — A potential resisting line from a 2+ year bearish channel is at 1.1840 today. The 50% of 1.2731-1.0927 is at 1.1830. Further, the 1.618% extension of 1.0927-1.1456 / 1.1028 is at 1.1883. This area — 1.1830 to 1.1883 is an ideal topping area for the USDCAD before the pair resumes its longer term downtrend to below 1.0927. A drop below 1.1644 would indicate that this has already happened.
AUDUSD — At this point, the rally from .7759 looks rather corrective and has stalled prior to the 61.8% of .7979-.7759 at .7895. With the 5 waves up from .7413 to .7979 — a 3 wave corrective setback is favored. That 3 wave setback may have already occurred with the decline to .7759. Another scenario is possible though. The decline from .7979 to .7759 may be the first of these corrective waves and the advance from .7759 to .7888 is the 2nd. A third wave within the correction would imply a decline below .7759. A rally through the 61.8% of .7979-.7759 at .7895 would lend confidence to the original interpretation that the pair is working higher from .7759.
NZDUSD — Kiwi looks like it is entrenched within a bearish flag that is correcting the decline from .7096 to .6840. The turn lower on 1/6 from the 50% of .7096-.6840 at .6969 implies that the next leg may have already started. In this instance, a break of .6840 is expected near term. If .6974 (1/16 high) is exceeded, then focus shifts to the 61.8% of .7096-.6840 at .6999.
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.