Euro Likely to Bounce Near Term

  • Euro Near Term Support at 1.3653
  • Japanese Yen Testing Year Long Trendline
  • British Pound In Corrective 4th Wave
  • Swiss Franc Headed To Yearly High (USDCHF Low)?
  • Canadian Dollar Testing 1.0700
  • Australian Dollar Breaks .8500
  • New Zealand Dollar Longer Term Trend Change

Commentary: We wrote Friday that “this decline should extend to at least the 100% extension of 1.3852-1.3693 to 1.3611, but bearish potential is much larger.” The decline ended at 1.3608 last night and since the decline is only in 3 waves so far, we have to respect the larger bullish trend. Very short term charts (15 min) show that the rally from 1.3608 would be in 5 waves on a push through 1.3679. Therefore, we are expecting EURUSD strength for the next day. Potential resistance is at the 38.2% of 1.3852-1.3608 at 1.3701 and the 61.8% at 1.3759.

Strategy: Move to flat (previously bearish)

Commentary: We wrote last week that “we expect the support line to be broken and for the USDJPY to continue lower next week.” The support line that were referring to was the line drawn off of the May 2006 and March 2007 lows. The pair did not close below the line Friday but is below the line right now. The next level of potential support is the 4/19 low at 117.60. 119.30-119.80 is resistance.

Strategy: Sell bounce to 119.30/80, target 117.60

Commentary: The decline from 2.0561 has reached the 161.8% extension of 2.0654-2.0424/2.0561 at 2.0181, which makes it likely that the decline from 2.0654 will prove to be impulsive (5 waves) rather than a corrective 3 waves. The rally from the low is most likely a 4th wave correction. We are looking for this rally to end near the 38.2% of 2.0561-2.0181 at 2.0327. Immediate risk is to the upside towards this level.
Strategy: Move to flat, get bearish near 2.0327, target TBD

Commentary: The possibility remains that an inverse head and shoulders pattern has been unfolding since May 2006. The short term pattern remain unclear but the rally from 1.1960 ended at the 38.2% of 1.2468-1.1960 at 1.2154 last Wednesday. Without any signs of an impulsive rally, we?ll continue to look for a break below 1.1960 and potentially 1.1877.
Strategy: Bearish against 1.2165, target below 1.1877

Commentary: We are looking for a corrective setback in the USDCAD to unfold. The rally from 1.0340 is clearly impulsive, signaling that the trend has changed from down to up. We have focused in recent weeks on the weekly chart to show that a long term bottom was close at hand. 1.0523 should be solid support. 1.0756 is the next level of chart resistance.
Strategy: Bullish now, against 1.0340, target TBD

Commentary: As mentioned Friday, we are treating the decline as the beginning of larger wave 4 in the 5 wave rally from .7268. Over the next seversal weeks, the AUDUSD could decline to the former 4th wave at .8162. However, since we are viewing this as a larger correction, trading is likely to prove choppy over the next several weeks (but chop lower). It is possible to count 5 waves down with an extended 3rd wave down from .8870, thus near term risk is to the upside towards .8545 and .8649.
Strategy: Flat

Commentary: The short term pattern in the Kiwi is the same as the Aussie. A clear 5 waves down sets the stage for a longer term decline but immediate risk is to the upside towards .7684 and potentially .7873. We are expecting the rally to unfold correctively and will be looking for an opportunity to get bearish on the bounce.

Strategy: Flat
*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.