Currency Crosses: Technical Outlook 02-12

The Euro crosses have plunged and the Euro / commodity crosses are at multi year lows. The Yen crosses are biding time before their next big move.


[B]Euro / British Pound[/B]

The EURGBP has strengthened in what I have treated as a small 4th wave. Price reversed from just above the former 4th wave extreme at 8800 now; which is a common area for corrections to end. I’ve been expecting a final small 5th wave to complete the decline from 9158 and that decline appears to be underway now. 8537-8574 is a target area. The lower level is where wave 5 = wave 1 (of c) and the higher level is where wave c = wave a (of C).

[B]Euro / Swiss Franc[/B]

Last Friday, the EURCHF has its biggest daily range (286 pips) since June 24, 2009 (which was 378 pips). The spike reversed in the center of a resistance zone and within a pip of parallel channel resistance. Continue to favor the downside, against the spike high. Additional weakness targets the 2008 low at 14300.

[B]Euro / Canadian Dollar[/B]

The EURCAD has plunged towards the December 2007 low at 14139. There are 5 waves down from 14763 and a corrective advance would encounter resistance at 14447-14485. Staying below 14575 (breakout point) keeps the trend pointed lower. A rally above there would present a reversal opportunity.
Euro / Australian Dollar[/B]

The EURAUD failed to remain above 15412 and focus is now on the 2000 low at 14991. Former supports at 15495 and 15586 are potential resistance levels. A rally above 15960 is required in order to turn bullish.

[B]Euro / New Zealand Dollar[/B]

The EURNZD decline from 21267 may be complete in 5 waves, which means that a more important low may be in place. The pair may be building a bullish base as price has remained above its January low.

[B]Euro / Japanese Yen[/B]

The larger trend is down against 12701 but potential remains for additional strength above 12430. As mentioned Wednesday, it is like the EURJPY to lull us to sleep before its next big move – that may be what is happening here. The initial downside target is 11544.

British Pound / Japanese Yen[/B]

“Big picture, it remains my contention that the rally to 16310 completed a 4th wave correction and that the GBPJPY will eventually decline to a new low beneath 11879.” Like the EURJPY, the trend is down and if you want to catch the big moves, you must be willing to sit through corrections. 14200 is clearly in 3 waves and the level ideally holds but a rally above there would not negate the longer term bearish bias. In the event of a break, 12688 is the 100% extension of the prior down move and is the initial objective. Again, the trend is down against 14535.

[B]Swiss Franc / Japanese Yen[/B]

The CHFJPY is in the same situation as the EURJPY. Like the EURJPY, respect the potential for additional corrective action above 8469. The trend is down against 8645.

[B]Canadian Dollar / Japanese Yen[/B]

I have altered the short term count, treating the drop from 8615 as small wave v (of 1) rather than the beginning of larger wave 3. Thus, the advance from 8235 is larger wave 2 (or B). The goal now is to identify the end of the rally. Levels to watch are 8674 and 8725. An impulsive decline would be the first sign of a top.

[B]Australian Dollar / Japanese Yen[/B]

“Bigger picture, the AUDJPY rally from the October 2008 low is in 5 waves and probably wave A of a multi year A-B-C correction. Most important is wave 5 of the rally, which is an ending diagonal. Ending diagonals are often fully and sharply retraced. This places a bearish target at 7074.” Resistance is clustered between 8073 and 8233.

[B]New Zealand Dollar / Japanese Yen[/B]

The larger trend is considered down against 6471. Bigger picture, the rally from 5259 is a diagonal and expectations are for a full retracement of that rally. Former support at 6273-6300 has serve as resistance thus far and a short term resistance line is holding. Price ideally stays below 6471.

Jamie Saettele publishes Daily Technicals every weekday morning, COT analysis (published Friday evenings), technical analysis of currency crosses on Monday, Wednesday, and Friday (Euro and Yen crosses), and intraday trading strategy as market action dictates at the DailyFX Forum. He is the author of [I]Sentiment in the Forex Market[/I]. Follow his intraday market commentary and trades at DailyFX Forex Stream. Send requests to receive his reports via email to [email protected].