EURUSD 20 day SMA Slope Changes to Negative for First Time Since Late December

[B]- Euro Trendline Resistance at 1.3560

  • Japanese Yen Support Line at 121.00 (USDJPY Resistance)
  • British Pound Breaks Support
  • Swiss Franc In Tight Range
  • Canadian Dollar Challenging 1.1000 Again
  • Australian Dollar Bearish Below .8349
  • New Zealand Dollar Bullish Above .7249[/B]


EURUSD - The EURUSD nearly tagged the short term resistance line this morning (drawn off of the 5/1 and 5/7 highs) on the spike through 1.3550. We wrote yesterday about the alternate count that has a correction ending at 1.3462. However, with sentiment still extreme (http://www.dailyfx.com/story/charting_center/futures_positioning_cot_report/British_Pound_Trend_Change_as_1179156202957.html) we favor lower prices. The aforementioned trendline resistance along with the 10 and 20 day SMA (1.3555 and 1.3582) also favor bears. In fact, the 20 day SMA has changed from positive to negative slope. The last positive to negative slope change occurred in late December, just before the EURUSD fell to 1.2865. We are bearish against the trendline, which comes in near 1.3560 (today?s high).


USDJPY - The USDJPY continues to hold above the 10 and 20 day SMAs but the entire rally from 115.14 is suspect. The rally is overlapping and thus corrective. The pair could chop higher towards trendline resistance near 121.00. Today?s high is just below the 78.6% of 122.17-115.14 at 120.67, which is another potential reversal point. The next big move is most likely a C wave decline below 115.14. A break of the support line drawn off of the 3/5, 3/28, and 4/19 lows would signal that the C wave is underway.


GBPUSD - While the short term count is unclear, it is clear that the declines are impulsive and the rallies corrective. A bearish stance is warranted as long as price remains below 1.9826. The break below 1.9759 this morning clears the way for a fall to support from late March/early April at 1.9545/89. 1.9528 is the 161.8% extension of 2.0131-1.9841/1.9997. The 100% extension at 1.9707 is potential short term support. If a double zigzag is forming from the 2.0131 high, then wave Y should extend towards the 1.9545/89 congestion area.


USDCHF - “The longer term wave structure is bullish as the decline from 1.2571 is a double zigzag (inverse of the EURUSD rally). A longer term inverse head and shoulders pattern (May 2006, December 2006, April 2007) is also visible.” We have been waiting for a daily close above the resistance line drawn off of the 2/12 and 4/9 highs, which held last week, before getting aggressively bullish. The USDCHF closed above the line last week, thus we are bullish against 1.1993. Ultimately, we expect this rally to span weeks and target 1.2571. The near term bullish case is strong above the short term trendline, which is near 1.2160.


USDCAD - The decline from 1.1168 is either a B wave in an A-B-C correction that will end above 1.1168 or the 5th wave of the decline from 1.1825. Either way, downside potential is limited. In the former scenario, the rally begins from before 1.1005. In the latter scenario, the pair will make a slight new low before reversing higher and tracing out a correction (which would be a 4th wave) of the decline from 1.1825. We are showing the latter count (5th wave preferred) on the chart below.


AUDUSD - With the AUDUSD failing (so far) at the 78.6% of .8390-.8168 and with the rally from .8168 failing to appear impulsive, it is possible that a larger correction is playing out. As long as price remains below .8349, our favored view is that a C wave decline is underway towards the 100% extension of .8390-.8168/.8349 at .8127.


NZDUSD - We wrote Thursday that “Kiwi has been the quietest pair in the last few weeks as the decline from the top (.7491) takes on the shape of a wedge, which is a bullish pattern. A break through the top of the wedge near .7370 would signal that price is likely headed for a re-test of .7491.” The rally from .7249 is clearly impulsive the setback from .7399 is corrective. Favor the upside and a test of .7491 as long as .7249 remains intact. Potential Fibonacci support is between .7342 and .7306.