The US dollar languishes at its lows against most major currencies but the USDJPY has built a strong base and additional strength is expected
EURO / US DOLLAR
Joel: Rallies have now extended well beyond 1.5000, with the market eyeing next figure support by 1.5100. The overall bullish structure remains firmly intact and any intraday dips are expected to be well supported ahead of 1.4830. Next key topside resistance comes in by 1.5240, the 78.6% fib retracement off of the major 2008 high-lows and we look for this level to be tested over the coming days. Short-term and medium-term technical studies are however looking stretched and any moves beyond 1.5240 are seen limited in favor of a major USD corrective rally. But for now, only back under 1.4830 would negate constructive outlook. Our model is currently running a short position from 1.5010 (stop 1.5110) but the trade has not held up well in the strong trending environment.
Jamie: After trading to 1.5060 the EURUSD has come off slightly, but a drop below 1.4940 is needed to signal a trend change. Keep in mind the larger 5th wave channel that we’ve focused on for weeks. That line is at 1.5086 Monday and increases 11 pips per day. In the event of additional upside, there are measurements concentrated at 1.5185.
BRITISH POUND / US DOLLAR
Joel: While the rally of the past few days has been impressive, the overall structure still looks quite toppish and we would expect to see the recent surge above 1.6500 to stall out at any moment. A closer look at the daily chart is quite revealing, with the market showing some strong internal resistance between 1.6665 and 1.6745 (former shoulder resistance of major h&s top). As such, we recommend looking to fade upside extensions into this area in favor of some bearish resumption. Look for a break back below 1.6485 to reaffirm outlook.
Jamie: After trading to a high just below 1.6700 (the high was made close to the 61.8% extension of the 1.5707-1.6404 advance), Cable has plunged. Former supports are now resistance at 1.6484, 1.6530, and 1.6607. The decline could be a series of 1st and 2nd waves, part of a leading diagonal, or a 3 wave correction. Price action since 1.6750 could also be in the mold of a triangle. There are many possible counts right now but most point lower from here. 1.6450 short was triggered this week. Move risk to 1.6600.
AUSTRALIAN DOLLAR / US DOLLAR
Joel: Despite overbought readings on both the daily and weekly charts, the pair remains very well bid with the market continuing to surge to fresh 2009 highs on a daily basis (0.9330 on Wednesday). Next resistance comes in by 0.9350, which represents a weekly high from August 2008. A break above 0.9350 will then expose an eventual retest of the critical 2008 highs by 0.9850. Intraday dips should continue to be well supported ahead of 0.9100, with only a break back below this figure to threaten the bullish structure.
Jamie: The AUDUSD reversal off of channel resistance (albeit unorthodox channel resistance) combined with momentum considerations (overbought + divergent) on multiple times frames put the pair at risk of at least a setback if not an outright reversal. Coming under .9181 would confirm as much.
NEW ZEALAND / US DOLLAR
Joel: Despite overbought readings on both the daily and weekly charts, the pair remains very well bid with the market continuing to surge to fresh 2009 highs on a daily basis (0.7635 on Wednesday). Next key resistance comes in by 0.7765, which represents a weekly high from July 2008. A break above 0.7765 will then expose an eventual retest of the critical 2008 highs by 0.8215. Intraday dips should continue to be well supported ahead of 0.7400, with only a break back below 0.7350 to threaten the bullish structure. The 10-Day SMA (0.7480) has been very supportive throughout much of the up-trend and bears would need to see a close below this level at a minimum to start to think about the potential bearish reversal and break back under 0.7350. Our model is short from earlier in the week at 0.7510 but the trade has been underwater for most of the time since inception.
Jamie: On the daily, the NZDUSD has tested (multiple times) and failed at a line extended from the 8/14 and 8/23 highs. In assessing the wave count, the rally from .7076 looks to be the final subdivision (wave 5 of c of Y). Since the high at .7640, the pair has marked time. A drop below the support line extended from .7250 and .7350 would be the first sign that a top is in place.
US DOLLAR / JAPANESE YEN
Joel: Our shift to a bullish outlook on Wednesday (based on 10/20-Day SMA positive cross) has paid off, with the market breaking the recent consolidation and accelerating through the 50-Day SMA and Upper Bollinger. Next key resistance comes in at 92.55 (21Sep high) which also coincides with the Ichimoku cloud bottom. Any pullbacks are now expected to be well supported ahead of 90.00. Weekly studies also confirm and show the formation of a base by 88.00.
Jamie: Either a triangle or complex correction is underway since December 2008. The next leg should be up towards 101.50 (maybe even above). Since the low at 88.00, a series of 1st and 2nd waves is visible. If this count is correct, then an exceptionally strong USDJPY rally is underway now. Move risk on the long to 91.20.
Written by Jamie Saettele
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