The Euro crosses, notably the EURGBP and EURAUD, could break through significant resistance in the coming weeks. Now is the time to position for the moves.
Since the April high (.8096), the EURGBP has been stuck in a sideways correction (most likely a triangle). Such consolidations are usually continuation patterns, so we expect a break to the upside before a major top forms. Specifically, the consolidation is viewed as a 4th wave within the 5 wave advance from the 2007 low at .6535. A push through .8097 would complete wave 5 and give way to a top and reversal.
Expect the drop from 1.6368 to end below 1.5991 in order to complete a corrective decline from 1.6376. The top of the Fibonacci zone, 1.5850-1.5975, should provide support.
We have focused on the triangle count in recent weeks and a triangle path has been unfolding as expected. If a triangle is underway, then expect a rally in wave D from current price. The 200 day SMA at 1.5395 provides support. Another possibility is that the decline from 1.6324 will end as a flat. Under this count, the EURCAD will dip just below 1.5278 before turning higher. In summary, the next large move is likely going to be higher.
We wrote last week that “since August 2007, the EURAUD has traded in a tightening range, but with a bullish bias. The higher lows since 1.5491 and the multiple tests of resistance just shy of 1.75 favor a bullish break. Now is the time to position for a break through 1.75.” There is no change to our call for a break above 1.75. The EURAUD held at support from the 8/11 low just above 1.68. Expectations for the breakout higher remain.
The EURNZD decline from 2.1854 was in 3 waves, although wave C was extended. A bullish bias is warranted against 2.0548 for a re-test of 2.1854.
Jamie Saettele writes Forex Technicals: The Day Ahead, Monday-Thursday (published at 6 pm EST), Daily Technicals every weekday morning (9 am EST), COT analysis (published Monday mornings), and analysis of currency crosses throughout the week. He is also the author of Sentiment in the Forex Market.
Contact at [email protected]
