-EURUSD holds 1.25
-USDJPY Fibonacci resistance
-GBPUSD slips below 1.41, 1.35 may be tested
-USDCHF still bearish from ending diagonal
-USDCAD breaking out
For now, I am sticking with the count that treats the consolidation since late January as a triangle, which would place the drop from that triangle as wave 5 in the 5 wave decline from the December high. Under this count, a low is in at 1.25 and price is headed higher in order to more fully correct the decline from 1.47. If 1.25 is broken, then there is the possibility that the decline from 1.33 is an ending diagonal as wave 5. Reward to relative risk is high for bulls at this point, irrespective of which count is correct. Still, until the picture clears, I do not feel safe being long.
The USDJPY has weakened following the test of the 50% retracement of the decline from 110.71. The advance to 98.75 may have completed a 3 wave advance from 87.09 that is the beginning of a larger, choppy correction. Former resistance at 94.67 is potential support. Staying below
The count on the daily, which shows 5 waves down from the 2007 high, indicates that risk of a sharp advance is high. Still, the drop below 1.41 exposes measured support at 1.38. Given that the advance to 1.4990 is in just 3 waves, the GBPUSD could test 1.35 prior to staging a larger rally (in what is probable a flat).
Expectations are for the USDCHF to decline to at least 1.13. This is where the ending diagonal began, which are usually fully retraced.
As I’ve favored the last few weeks, the triangle that has been underway since October is probably complete at 1.2020. The breakout scenario is favored as long as price is above 1.2348. The rally above 1.2770 inspires confidence in the bullish outlook.
I am zooming out to the daily in order to highlight the long term bearish implications from the 5 wave drop and subsequent 3 wave rally (since July 2008). The corrective rally from the October 2008 low ended right at the former 4th wave, which is typical of corrections. The pattern since the October low can also be categorized as a head and shoulders continuation. Coming under the February 2 low at .6245 would mark a break of the neckline and focus would then shift to the October low of .60. A word of warning to bears though, staying above .6245 keeps the larger range intact and there is risk of a rally that exceeds .6857 prior to resumption of the downtrend.
The NZDUSD has declined impulsively (5 waves) since its 2008 high and that decline was followed by a 3 wave rally (from the November low). The drop from .6090 is viewed as beginning of the next bear leg. Staying below .5201 keeps structure bearish. .5050 is short term resistance.
Jamie Saettele publishes Daily Technicals every weekday morning (930 am EST), COT analysis (published Monday mornings), technical analysis of currency crosses throughout the week (EUR on Tuesday, JPY on Wednesday, GBP on Thursday, AUD on Friday), and the DFX Trend Index every day after the NY close. He is also the author of Sentiment in the Forex Market.
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