FX Technical Weekly

The US dollar is declining against major currencies, but USDJPY has established a solid base and further strength is expected.

euro/US dollar

Joel: The rally cleared 1.5000 and the market sees support for the next number at 1.5100. The overall bullish structure remains unchanged and a nice daily drop to 1.4830 is expected. The next key resistance is at 1.5240, the fiber is down 78.6% from its 2008 peak and we may see this level being tested in the coming days. However, short to medium term technical studies appear to be expanding and any move beyond 1.5240 is seen as capped by a large corrective rally for the US dollar. But for now, it will only return below 1.4830, which will override producer parameters. Our pattern is currently short from 1.5010 (stop 1.5110) but failed to hold the trade well in a strong trend.

Jamie: After trading after 1.5060, EUR/USD is down slightly, but should drop below 1.4940 to signal a change in trend. Remember the main wave 5 channel we have been focusing on for a few weeks now. This line holds at 1.5086 on Monday and is up 11 pips on the day. In the case of the extra height, the center of measurement was 1.5185.

British pond / US dollar

Joel: Although the rally over the past few days has been impressive, the overall structure still looks great and we expect the final rally above 1.6500 to stop at any moment. A closer look at the daily chart is important as the market shows strong internal resistance between 1.6665 and 1.6745 (previously high resistance of the h&s high shoulder). Therefore, we recommend blurring the extensions in this area so that the mess starts over. Watch for a break below 1.6485 to confirm options.

Jamie: After trading at 1.6700 (1.5707-1.6404 was a high around 61.8% up), it just fell. Previous supports are now holding at 1.6484, 1.6530 and 1.6607. The fall can be a series of 1st and 2nd waves, part of the first diagonal, or a 3-wave correction. The price action could also be triangular from 1.6750. There are many potential outcomes right now, but most of them come from here. Short positions at 1.6450 have activated this week. Let's move on to risk 1.6600.

Australian dollar / US dollar

Joel: Despite reading a lot on the daily and weekly charts, the pair is still in good demand as the market continues to cool down to its 2009 high (0.9330 on Wednesday) on a daily basis. The next resistance is at 0.9350, which marks the August 2008 weekly high. A break above 0.9350 would see a recent correction to the critical 2008 high at 0.9850. The downside of the day should be well supported ahead of 0.9100, only a break below this chart pattern threatens bullish structure.

Jamie: The reversal of the AUDUSD channel resistance (despite unconventional channel resistance) coupled with a multi-frame temporary reflection (overbought + misc) exposes this pair to at least one risk, if not another. An entry below 0.9181 would confirm a lot.

New Zealand / US dollar

Joel - Despite additional buying on both the daily and weekly charts, the pair continues to offer a very good deal as the market continues to cool off daily to its 2009 high (0.7635 on Wednesday). The next key resistance lies at 0.7765, which is the July 2008 weekly high. A break above 0.7765 points to a last buyout in 2008 at 0.8215. Daily decline should be well supported ahead of 0.7400 with a break below 0.7350 only threatening to push structure higher. The 10-day SMA (0.7480) has been very supportive of many uptrends and bears need to close below this level to start thinking about a possible reversal, which should be at least below this level and break below 0.7350. Our pattern at the start of the week is short at 0.7510, but trading has been mostly crowded since it opened.

Jamie: Every day NZDUSD tried to do this (several times) and failed on the extended top lanes 8/14 and 8/23. Based on the wave count, the 0.7076 set appears to be the last subdivision (wave 5 c of Y). Since hitting a high at 0.7640, this pair has set the time. This will be the first sign that a break above the support line that runs from 0.7250 and 0.7350 will occur.

US dollar / Japanese yen

Joel: Wednesday's bullish outlook (based on the positive crossover of the 10/20-day SMA) came true, breaking the final market consolidation and accelerating on the 50-day SMA and Bollinger Bollinger Upper. The next key resistance lies at 92.55 (September 21 high) and is in line with the lower boundary of the Ichimoku Cloud. Any withdrawal before 90:00 is expected to be well received. The weekly study also confirms and shows base formation at 88.00.

Jamie: Since December 2008 you've been correcting a triangle or complex. The next segment should be up to 101.50 (maybe higher). A series of waves 1 and 2 can be seen from the low point at 88.00. If this estimate is correct, there is a very strong rally for USDJPY going on right now. Go to long risk 91.20.

Jamie Settle