The Euro crosses are mosly constructive but the better opportunities are in the Yen crosses - which could break higher. Stops should be placed below the identified support levels.
Euro / British Pound
There is the risk of a pullback following the break of the resistance line. However, the rally has accelerated so a 3rd of a 3rd wave may be underway from .8703. The trend is up regardless of near term wave count specifics as the decline from the December high is in 3 waves.
Euro / Swiss Franc
There is little to say about the EURCHF. The fight between bulls and bears wages on in a triangle that has been underway since October. Triangles are typically continuation patterns, so one may wish to favor the downside. However, forecasting is an exercise in probabilities rather than certainties so jump the gun at your own risk. Pushing through either the top of bottom line triangle line would present a breakout opportunity.
Euro / Canadian Dollar
The series of lower lows and lower highs in the EURCAD since the December 2008 high takes the form of a wedge, which is bullish. Price should remain above 1.54. Look for support from the short term line extended from the July 30 and September 7 lows.
Euro / Australian Dollar
The decline that began last October may be nearing an end. Divergence with daily momentum studies warn of a reversal. Of course, it is not recommended that one go long quite yet. Wait for a pattern such as a head and shoulders bottom (which would require a rally through 1.7300) before committing to the long side. A daily close above trendline resistance would be an early signal that the trend has changed.
Euro / New Zealand Dollar
Same deal in the EURNZD. “Divergence with daily momentum studies warn of a reversal.” Rallying through the resistance line would suggest that a low is in place.
Euro / Japanese Yen
The EURJPY is in the center of a large range. At this point, we don’t know if the range that has consumed the past many months is a head and shoulders top or triangle. The first is bearish and the second give scope to one more bull leg (to levels outlined on the chart) prior to a reversal. Bulls should keep stops below 131.00. The rally from there is impulsive so a rally is expected to clear 134.45 regardless of the larger trend.
British Pound / Japanese Yen
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 again in August. Coming under 146.74 would suggest that a top is in place. Until then, there is the possibility that range trading continues. In this case, the underside of the latest broken support line would now be resistance.
Swiss Franc / Japanese Yen
The CHFJPY is in the same position as the EURJPY. A potential head and shoulders top is evident but so is a bullish triangle. The EURJPY comments are applicable here. That is, a cautious bullish bias is warranted against 86.39 until price exceeds 88.72.
Canadian Dollar / Japanese Yen
The CADJPY looks similar to the GBPJPY on the daily. A choppy rally from January may be over following a double top in early August / test of a former support line (as resistance). Additional pattern development is required before we can go short though. A rally through 90.41 would expose 95.60. Like the other Yen crosses, favor the upside for now
Australian Dollar / Japanese Yen
The AUDJPY rally reversed at the 61.8% of the decline from 104.55. A former support line held as resistance near there as well. Still, short term structure is bullish against 76.39.
New Zealand Dollar / Japanese Yen
The NZDJPY rally from 52.89 may be a C wave. Specifically, the rally may be an ending diagonal. This would explain the corrective nature of the rally from 52.89 to 65.96. This pattern also fits with the idea that the Yen crosses have one more run left before reversing lower from important tops. Price ideally remains above 63.02 on its way to 69.10 (100% extension of wave A).
Jamie Saettele publishes Daily Technicals every weekday morning (930 am EST), COT analysis (published Monday mornings), technical analysis of currency crosses (Euro and Yen crosses), and short term trading strategy as market action dictates. He is the author of Sentiment in the Forex Market. Follow his intraday market commentary at DailyFX Forex Stream.
Contact Jamie at [email protected]
