· Euro Backs Off from Resistance
· Japanese Yen Rebounds from 119
· British Pound Potentially in 3rd Wave
· Swiss Franc Turns Higher
· Canadian Dollar in Flag Formation
· Australian Dollar Turns Over at Trendline
· New Zealand Dollar Momentum Slows
EURUSD As we said yesterday, While one more high above 1.3174 is possible, we maintain that this could be a MAJOR top (the end of an A-B-C correction from 1.2865). Only a break below 1.2865 confirms that wave 3 down is underway. A break of 1.2865 would shift focus to 1.2667, which is where the 1.3370-1.2865 decline would equal the decline from 1.3174. EURUSD has bounced lower from the 61.8% fibo of 1.3367-1.2865 at 1.3177, which signals that the larger move noted may be underway.
USDJPY We said previously, One more low is likely given the RSI extreme in place (240 minute) at 119.17. Rarely does a market turn up (or down for that matter) following a momentum extreme. One more low would create bullish divergence with oscillators and free up the USDJPY for a rally. Still, this pair is nearing at least an interim bottom if not a major one. The 78.6% of 117.97-122.21 at 118.89 may be the level at which the USDJPY ultimately turns higher. The USDJPY has shown a significant turn from 118.99 in what could be a resumption of the longer term uptrend. For more on the USDJPY, see http://www.dailyfx.com/story/special_report/special_reports/A_Dip_in_a_Long_1171644703102.html
GBPUSD The longer term wave structure suggests that a major top is in place at 1.9915. In fact, the rally from 1.8090 traced out an ending diagonal. Ending diagonals are often fully retraced. In the very short term, Cable may be in a 3rd wave, which is supported by the overnight drop in price. If this happens to be a 3rd wave, then measured support doesnt begin until 1.9351 which is where the decline from 1.9568 would equal the decline from 1.9680 to 1.9464.
USDCHF USDCHF has staged a lower Bollinger Band breakout and if the candle holds the highs for the day then it suggests that the pair is ready for a turn to the upside. Support comes into play at the swing low of 1.2312 while resistance is nowhere to be seen until the 1.2500-1.2555 zone from the 2/1207 highs set last week.
USDCAD Remains in a very tight bear flag formation with volatility decreasing to near standstill levels. A break above 1.1660 may target the 1.1723 38.2 Fib retrace level of the current down trend. A break below 1.1620 opens the way for a test of the psychologically important 1.1500 level.
AUDUSD The Aussie has printed a third lower triple top on the daily and the overall bias remains downward unless the 2/19/07 swing high of 7889 is taken out with conviction. Given the tightness of risk, a turn trade to the downside may make sense, but shorts should note that the doji on the charts represents hesitation rather rejection and technical picture could change rapidly if prices recover recent highs.
NZDUSD The technical picture on the Kiwi is more constructive than on the Aussie but the overhang from .7041 highs made in January continues to press on the pair and is likely to slowdown any forward momentum. A retrace to .6774 (a 38.2% Fib of the recent rally) would not appear unreasonable, although a power move through the .7041 level would open a challenge of the .7099 high set at the start of 2007.
Glossary of Terms
CCI(20) 20 day Commodity Channel Index
> 0 bullish
0 > bearish
> 100 extremely bullish
-100 > - extremely bearish
RSI(14) 14 day Relative Strength Index
> 50 bullish
50 > bearish
> 70 overbought
30 > - oversold
MACD ? - MACD slope (MACD MACD[1])
> 0 bullish
0 > - bearish
Mom(21) 21 day Momentum
> 0 bullish
0 > - bearish
ATR(14) 14 day Average True Range (volatility)
Medium 75th percentile* > ATR(14) > 25th percentile*
High - > 75th percentile*
Low 25th percentile* >
*measured against past 3 months