Euro Rolls Over - Major Top In Place?

• Euro Quickly Retreats
• Japanese Yen 118.50 In Sight
• British Pound May Make One More High
• Swiss Franc Loses 1.2200
• Canadian Dollar Corrects Gains
• Australian Dollar Wants .8100
• New Zealand Dollar Challenging High

EURUSD – We said Friday that “Risk is quickly shifting to the downside. EURUSD may be at a major turning point.” Last week’s candle traced out a shooting star (long upper wick?a bearish reversal candle). The short term structure remains bearish below 1.3144 but 1.3300 should offer resistance as this level was previously support. A sustained break below 1.3262 would increase confidence in the bearish case and target 1.3188.

USDJPY – As long as 118.51 holds as resistance, the triangle structure remains intact and we are looking for a decline towards triangle support near 116.50. However, with the pair refusing to hold below 118.00 and price remaining above the 200 day sma, we have to consider other alternatives. A break above 118.50 exposes the level where the rally from 115.76 would equal the 115.15-118.50 rally – at 119.12. This level is reinforced by the 61.8% of 121.66-115.15 at 119.16. Still, when viewed on an hourly chart, the structure of the rally from 115.76 is overlapping and corrective, which suggests that the entire rally should be retraced.

GBPUSD – From Friday, “we are expecting a pullback with support at 1.9556 (prior 4th wave). 1.9693 is most likely the top of wave B within an A-B-C correction that began at 1.9729. We are looking for a C wave to complete the 4th wave correction and end near 1.9556.” With the pair bouncing at 1.9569 this morning and the decline from 1.9729 looking corrective, there is little reason to change our outlook for one more new high (above 1.9729). If price comes under 1.9569, then the next support is at the 38.2% of 1.9213-1.9729 at 1.9531. Regarding the longer term trend, only a decline below 1.9436 indicates additional bearish potential.

USDCHF – No change – “The USDCHF rally from 1.1877 to 1.2571 traced out 5 waves, meaning that the larger trend is up. Once 5 waves are completed, a correction should unfold in 3 waves. The correction that ensued was a complex one, known as a double zigzag (two a-b-c corrections connected with an X wave?labeled W-X-Y). Our confidence that a bottom is in place is improved due to the fact that the pair turned up from the 78.6% Fibonacci level of the 1.1877-1.2571 rally. The rally beginning now should eventually take out the January high at 1.2571.”

USDCAD – This big decline is likely the C wave of an A-B-C decline from 1.1879. 1.1512 is where the C wave decline would equal the A wave decline. Support is reinforced by the confluence of channel support / 11/21/2006 high at 1.1470. RSI (daily) is nearing oversold territory and CCI (daily) is below -100. The pair is likely to chop lower to test the mentioned support near 1.1470/1.1512 before a major rally attempt. A rally through 1.1679 (3/13 low) suggests additional bullish potential.

AUDUSD – Focus remains on .8130 but the Aussie is nearing the latter stages of a long term rally. Daily RSI is oversold for the first time since November 2006. Similar to Cable, we are looking for a corrective wave 4 followed by a thrust higher in wave 5 in order to complete the 5 wave bullish sequence that began at .7680. Wave 4 may very well be over at .8027 and a break above .8096 confirms this. Again, we are looking for another rally with focus on .8130 – and then a reversal.

NZDUSD – Kiwi continues to rally and looks poised to take out the 3/23 high at .7162. The rally is certainly getting extended as evidenced by the risk reversal rate on 1 month options (call price – put price) is the highest that is has ever been. The previous high for the RR rate occurred in early January of this year when Kiwi topped out at .7097. A break above .7162 exposes the next level of chart resistance at .7202 (12/5/2005 high). Coming under .6991 indicates bearish potential (possibly a major reversal). Divergence with oscillators on the daily suggests reversal potential as well.