Euro Crosses Mostly Bullish

  • EURGBP breaking higher from bullish base
  • EURCHF triangle?
  • EURCAD testing resistance from trendline and Fibonacci
  • EURAUD and EURNZD should work higher for at least a few weeks

Recent commentary was that “the EURGBP may have completed a correction from the December 2008 top. The structure of the decline since then is not especially clear, which is the first sign that the pair in question is stuck in some sort of correction. If the interpretation of the wave count above is correct, then the EURGBP should retrace most of its decline. Today’s outside bullish day is a good start.” Since that outside bullish day, the EURGBP has traded higher, reaching its highest level since June 9th today. Favor the upside against .8511. There is potential resistance from the 200 day SMA at 87.50.

Since the October 2008 low, the EURCHF has traded in a contracting range that will probably end up as a triangle. Triangles are continuation patterns and the prior trend was down, so expect a break lower eventually. It is possible that the rally to 1.5387 completed wave e of the triangle. Coming under 1.5000 would reinforce this view.

The decline from 1.7522 can be counted a number of ways - either a series of first and second waves in a larger decline or an a-b-c correction that is complete. The structure of the rally from 1.5342 will indicate which count is more probable. As of now, the rally can be classified as corrective (3 waves). However, if wave iv and v develop, then the bearish 1-2 count is negated. The pair is currently testing resistance from the confluence of a trendline and the 61.8% of the decline from 1.6983.

It is possible that a multi decade top is in place for the EURAUD at 2.1174 (October 2008 high) but a strong advance, even if just countertrend could bring price back to 1.8660 (decline from there is choppy and could be a diagonal).

The decline from the February high is nearing and end as a 5th wave diagonal. Expectations are for a recovery back to 2.3600 (full retracement of the diagonal). Reversals from diagonals can be sharp.

[I]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.

Please send comments about this report to <[email protected]>[/I]