Dollar Catches a Bid - Is This the Reversal?

  • Euro Sub 1.3600
  • Japanese Yen Breaks 120.00
  • British Pound Coming Under Channel Support
  • Swiss Franc Right at Trendline
  • Canadian Dollar Correction
  • Australian Dollar Under 20 day SMA
  • New Zealand Dollar Bearish on Daily

EURUSD - The turn lower from channel resistance has sent the EURUSD below the first support shelf at 1.3582 but coming under last week’s low at 1.3541 would more strongly signal that a top is in place. This level is reinforced by 2 month trendline support near 1.3550. Oscillators on the daily are bearish as RSI has rolled over from above 70 and a bearish MACD crossover occurred yesterday. Near term resistance is at the 38.2% of the decline from 1.3677 to 1.3559 at 1.3604 (the 61.8% is at 1.3632). A break below trendline support warrants a bearish stance against 1.3677.

USDJPY - The USDJPY looks top heavy at current levels as evidenced by RSI bearish divergence on the hourly. Still, the resistance is not until the 78.6% of 122.17-115.14 at 120.67. With the rally from 117.60 in 5 waves, a correction is due towards the former 4th wave, which intersects with Fibonacci support at the 38.2% and 50% of 117.60-120.23 at 118.91/119.22.

GBPUSD - Cable is breaking below trendline support and coming under 1.9864 would expose the 100% extension of 2.0131-1.9864 / 2.0071 at 1.9804. A decline much below there targets the 161.8% extension at 1.9639. Similar to the EURUSD, daily oscillators are bearish (MACD crossover and declining RSI). An intraday reaction high at 1.9968 is initial resistance.

USDCHF - As mentioned yesterday, “the longer term wave structure is bullish as the decline from 1.2571 is a double zigzag (inverse of the EURUSD rally). A longer term inverse head and shoulders pattern (May 2006, December 2006, April 2007) is also visible.” Still, a break above the trendline drawn off of the 2/12 and 4/9 highs is required to clear the way for higher prices.

USDCAD - Yesterday’s candle ( hammer) may be the beginning of a much needed correction. “There is little doubt that the decline from 1.1825 is a 3rd wave. Therefore, any rally should be treated like a correction as a 5th wave decline will eventually take the USDCAD to lower levels. Initial resistance is the 4/24 high at 1.1246. With RSI putting in a momentum extreme on 4/25 at 19.91 (daily), downside potential looks limited as the next few weeks may be dominated by sideways/corrective trading in order to correct the oversold condition (daily). The next support level is the 9/01/2006 low at 1.1028 followed by the 261.8% extension of wave 1 (1.1879-1.1562) - at 1.1000.”

AUDUSD - The AUDUSD has come under the 20 day SMA and briefly traded below .8233 support this morning. Weekly RSI is divergent and above 70 for the first time since November 2004. The rally from .7678 is an extended 5th wave, which are often fully retraced. Near term resistance is at the 20 day SMA / 5/1 low at .8271/81. Rallying above the short term resistance line indicates additional bullish potential and would negate our bearish bias.

NZDUSD - The resistance from the yearly trendline and the bearish MACD crossover (daily) along with daily RSI declining from above 70 suggest that we look lower but a break below .7348 is required before we can get aggressively bearish against .7491. Former resistance at .7313 is now potential support. Short term resistance is at the 5/1 high of .7445.