Dollar Roars Back as Reversal Takes Hold

  •      [B]Euro at 100 day SMA[/B]
  •      [B]Japanese[/B][B] Yen Choppy[/B]
  •      [B]British Pound Breaks Major Support  Line[/B]
  •      [B]Swiss Franc Long Term Head and  Shoulders Opportunity[/B]
  •      [B]Canadian Dollar Wave 4  Underway[/B]
  •      [B]Australian Dollar Correcting  Lower[/B]
  •      [B]New  Zealand[/B][B] Dollar Towards  .7400[/B]

Commentary: The inability to hold above the 6/1 low at 1.3392 and the break under the trendline drawn off of the October 2006 and January 2007 lows indicates additional bearish potential. The next support level is the 100% extension of 1.3680-1.3392/1.3552 at 1.3264. Former support at 1.3392 should be solid resistance now. The pair has stalled at the 100 day SMA, a break under here would be significant as the EURUSD has traded north of this moving average for all of 2007. Even if the pair dowes continue lower in the next few days, we prefer to wait for a 3 wave setback in order to align with the downtrend.

Strategy: Waiting for a 3 wave setback in order to align with the downtrend.

Commentary: We remain bearish against 122.13. We mentioned yesterday that “it is unclear whether or not the upward correction is complete” and that "resistance is clustered from 121.44 to 121.83 (50%-78.6% of 122.13-120.75). The USDJPY has stalled just above the 61.8% at 121.60 this morning but as long as 122.13 remains intact, we are bearish. We are anticipating a move lower in a 3rd wave, below 120.75, towards 119.50.

Strategy: Bearish Now, against 122.13, target TBD

Commentary: Cable has broken under the May low at 1.9676, negating the bullish setup and indicating additional bearish potential. More importantly, the pair has dropped under a support line that dates toApril 2006. The next potential support level is the 100% extension of 2.0131-1.9676/1.9964 at 1.9509. Any rallies should be treated as an opportunity to align with the downtrend. Initial resistance is at 1.9715

Strategy: Bearish at 1.9715, against 1.9791, targeting 1.9509 and 1.9228

Commentary: The USDCHF has reversed course in impressive fashion and the break above 1.2329 suggests that the USDCHF is headed towards the 100% of 1.1993-1.2329/1.2145 at 1.2481. The USDCHF is right at a trendline drawn off of the October 2006 and January 2007 highs. A daily close above here would bolster the bullish outlook. This line is also the neckline from a 13 month head and shoulders pattern, which has much more bullish implications.

Strategy: Bullish now, against 1.2145, targeting 1.2500

Commentary: The first real rally attempt in over a month is taking place in the USDCAD. Remember that we are viewing the rally from the low as a correction, so price action could be choppy for the next few weeks. Ultimately, we look for this large 4th wave to challenge the zone bounce by the 23.6%-38.2% Fibonacci levels of 1.1825-1.0548 at 1.0849/1.1036. We will look to align with the 5th lower at that point. However, there is certainly a chance to trade from the bull side until then. Support should be strong at 1.0606 but we are waiting until we see a tradable pattern before taking action.

Strategy: None

Commentary: The decline from .8476 is in only 3 waves, which is corrective, so the trend remains bullish above .8365. However, RSI has declined from overbought on intraday charts and exhibits divergence on the daily, so it seem more likely that this is the beginning of a deeper correction. Yesterday?s long wick and key reversal day also favors the downside. Short term bearish opportunities exist as long as price is below .8443. The 100% extension of .8476-.8386/.8443 at .8353 is potential support as is the area bound by the 161.8% extension and the 61.8% of .8162-.8476 at .8282/97.

Strategy: Bearish now, against .8443, targeting .8353 and .8300

Commentary: Kiwi is in the same position as the AUDUSD as it seems likely that a deeper correction will occur. Yesterday?s candle is identical to that of the AUDUSD and daily RSI also exhibits divergence. .7463 and .7406, the 100% and 161.8% extension of .7573-.7481/.7555 are potential short term support levels. Short term bearish opportunities exist below .7555.

Strategy: None

*JTREND is a proprietary calculation that uses recent highs, lows and closes to determine the trend. JTRENDLT is the longer term trend and uses the last 4 weeks of price data. JTRENDST is the shorter term trend and uses the last 5 days of price data. An example is below. Blue bars denote bullish trend and red bars denote bearish trend. The chart below is the EURUSD weekly chart.