Euro Crosses: Look Higher

[DailyFx]

The EURGBP breakout is a 5th wave, but it is not yet complete. There is a high reward/risk opportunity in the EURCAD and breakout opportunity in the EURAUD.









We wrote last week that “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.” We got the bullish break and the likelihood of the EURGBP forming a major top this month is good. A small 4th wave may be underway. Expect support from the open gap in the .8076-.8090 zone. A level that may serve as the ultimate is .82. This is where wave 5 (from .7869) would equal wave 1 (.6535-.6867 in early 2007).




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.




A fourth wave correction is most likely complete at 1.5260. Wave v of either a C wave or a 3rd wave is probably underway and will not be complete until price exceeds 1.6324. The 200 day SMA has supported price in recent days and gives us confidence in the bullish outlook. Short term support is just above 1.54 (if needed).




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.” The pair actually traded just above 1.75 earlier today before pulling back. It is unlikely that the level (1.75) will hold for a 4th time since 2006). Short term support is at 1.7240 and 1.7290. We expect a bullish breakout as long as price is above 1.7078.




With a bullish outlook for the EURAUD, we should favor the upside for the EURNZD as well. Trend structure remains bullish, with the 200 day SMA pointing up and RSI sloping up and above 50. The pair also held above former support from July near 2.05. For a short time, the EURNZD traded below a short term trendline in what was probably a false break.





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 jsaettele@dailyfx.com