Near Term Price Action Indicates Reversal Potential

• Euro Trading Heavy
• Japanese Yen Impulsive Rally (USDJPY Decline)
• British Pound Below Short Term Trendline
• Swiss Franc Coming Into Key Resistance (USDCHF Support)
• Canadian Dollar Ending Diagonal
• Australian Dollar Holding Trendline Support
• New Zealand Dollar 3 Wave Decline is Suspicious


EURUSD – The EURUSD continues to rally, hitting 1.3615 this morning. The next level of chart resistance is the 2004 high at 1.3666. There is no change in the call for a longer term top due to the 7 wave rally (which is a double zigzag?.two zigzags connected with an X wave – labeled W-X-Y) from 1.1638. Still, a break of 1.3666 would expose 1.3799, which is where wave W (1.1638-1.2979) would equal wave Y (beginning at 1.2458). The chart today shows the potential resisting line drawn off of the May 2006 and December 2006 highs. Daily RSI is overbought and divergent with the May and December peaks. The EURUSD could very well chop higher but evidence strongly suggests that the next move of consequence is down. Coming under 1.3524 bolsters the turn scenario.


USDJPY – We remain bearish due to CCI crossing below 100 on the daily, the resisting line from the 2/12 and 2/22 highs, the 61.8% of 122.17-115.14 at 119.48, the appearance of a head and shoulders reversal pattern, and most importantly, the longer term wave structure. The longer term wave structure strongly suggests that wave C (or 3) from a bearish sequence that began at 122.17 is underway and will eventually come under 115.14. The short term bearish case is strong below 118.73 as a 3rd wave may be underway. Near term bearish targets are the 100% extension of 119.84-118.08 / 118.73 at 116.97 and the 161.8% extension at 115.88. Price has also come under the 200 day SMA. The alternate count has 5 waves already down from 119.84 with strong resistance at 118.73.


GBPUSD – Cable traded to a 26 year high today after briefly trading above 2.0100. 5 waves from 1.9589 may be complete, thus we are looking for a pullback (at least) with support residing in the previous congestion area of 1.9880/1.9938. A break below 1.9938 indicates additional bearish potential. A very short term trendline has been breached, which has bearish implications. While there are not 5 waves down yet from the top, remaining below 2.0093 warrants a cautious bearish bias for a possible 3rd wave lower.


USDCHF – A rally above 1.2281 would inspire confidence in the longer term wave count that calls for a turn to much higher levels. This longer term turn scenario remains valid as long as 1.1877 holds. The USDCHF is coming into support from monthly S1, which is at 1.2002. Near term, there are 5 waves down from 1.2187, with resistance near the previous 4th wave at 1.2070. Until there are 5 waves up, well remain neutral.


USDCAD – The USDCAD decline is overextended and the nature of the decline from 1.1394 suggests that a bottom is close at hand. The decline from 1.1394 is a 5th wave and takes the form of an ending diagonal (overlapping waves). This latest spike lower is likely the thrust that is so common with these patterns. A return to the 1.1394 level in a correction is likely before another leg lower eventually challenges 1.0927.


AUDUSD – Recent commentary states that “daily oscillators (CCI and RSI) are overbought and divergent with recent highs. Also, the break that occurred at .8000 was from a triangle and triangle breakouts are terminal (meaning that they are eventually retraced). The daily chart below shows the triangle (a-b-c-d-e) and the 5 wave rally that has ensued and RSI. With daily oscillator action, an extreme risk reversal rate (1 month 25 delta options) and the Aussie at former longer term resistance, we are looking for a reversal.” A 5 wave decline from .8390 sets the stage for more downside action and we are bearish against the high (.8390) on a break of trendline support near .8280.


NZDUSD – We showed the 5 wave decline from .7491 yesterday to suggest that another leg lower would occur. That leg lower took Kiwi to .7362 last night but this results in just a 3 wave decline from the high (.7491). This leaves the door open to another high, therefore we urge caution with regards to getting bearish before a break of the trendline (shown below).

Well reversal points can be judged looking at Fibo and psychological levels but can be always correct but atleast comes nearby.
Anways nice written.

Hi , I like your writing and it is very much beneficial to the forex trader .Because the concept of price action trading embodies the analysis of basic price movement as a methodology for financial speculation, as used by many retail traders and often institutionally where algorithmic trading is not employed.