Euro Crosses

Technically speaking, the Euro crosses are mixed. The EURGBP has broken above trendline resistance while the EURCHF may have just completed a bearish triangle and the EURCAD is below its own trendline resistance. Favor range trading in EURAUD and EURNZD.

The EURGBP appears to 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. Having traded above a former resistance line drawn off of May and June highs for 3 days now, favor the upside against .8535 (7/10 low).

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 larger trend is down against 1.6335 as suggested by the series of lower lows and lower highs since the December 2008 high above 1.7500. Price is below the 200 day SMA as well although the slope of the moving average is more or less flat. Near term resistance is at 1.5830 and 1.5940.

After rallying to 1.8110, the EURAUD has returned to the lower end of its range. Structurally, the consolidation since the June low at 1.7144 could be a 4th wave (probably a triangle or flat). If trading this pair, favor range trading for now (1.7144-1.8110).

I have maintained in recent weeks that “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.” We did see a reversal, but strength persisted to just 2.2525. The EURNZD has retraced most of that gain. A recovery back to and eventually above 2.2525 remains possible however. Focus on range trading with this pair. A daily close above 2.2525 or below 2.1546 would indicate breakout potential.

[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]