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EURUSD
London Commentary: As expected, the EURUSD rallied strongly in a third wave on Friday. There is no reason to change the outlook at this point for a new high (above 1.3852). Very short term, the pair could drop below 1.3755 to complete a flat correction before the larger advance continues. The bullish bias is strong as long as price is above 1.3663.
New York Update: Already higher in the the New York afternoon, previous Euro momentum may be petering out just below the 1.3800 figure heading into the close. Momentum indicators are supportive of the short term reversal notion, as a failure at the psychological trendline would open scope for a test of the 1.3750 trendline support below. Further breakdowns would see barriers at the 1.3695 come into play, which would fill the gap" earlier in the morning. Comparative upside is being restricted to the 1.3815 intraday high.
Strategy: Remain bullish, risk is at 1.3551, target above 1.3852
USDJPY
London Commentary: We wrote on Friday that “a new low below 114.80 at the least is expected as the rally from there is clearly a 3 wave advance ending in a spike high last night at 115.63. Favor the bearish side as long as price is below 116.46 as the decline from there is impulsive. Very short term, favor the bear side below 115.63. A break below 114.80 places focus on 114.35 ans subsequently the 61.8% of 111.59-117.12 at 113.70.” The USDJPY plummeted Friday and opened this week lower, trading to 112.59 last night. To this point, the advance from 112.59 is in 3 waves and fits as a 4th wave correction in a 5 wave bearish cycle from 116.46. Expect at least a slight new low (below 112.59), likely today. Since a drop under 112.59 would complete 5 waves, risk of a pullback would be high at that point.
New York Update: Even with momentum indications mixed in the New York afternoon, bullish bids are likely to help an advance to the 114.00 psychological resistance. Should the pair trade above the 113.99 NY morning high, it would open potential for a test of the upside resistance barrier in the 115.00. Downside tests reside on a break of the 113.22 short term support.
Strategy: Flat
GBPUSD
London Commentary: Cable has traded in a choppy manner but continues to trade with a bullish bias. It is possible that the GBPUSD is in a third wave now and that a very strong rally will begin in the next few hours. However, we favor a drop below 2.0243 to complete a flat correction and then the strong rally. The bullish scenario is best served by this since the rally from 2.0243 takes on a 3 wave corrective form and is most likely a small wave b.
New York Update: Heavy resistance is coming in strong just below the 2.0350 trendline resistance as the price action consolidates just the 2.0300 psychological figure at 2.0274. At a pivotal support level, breakdowns here would open plausible tests below at the 2.0184 trendline support, in line with momentum suggestions. Any upside potential would have to be realized on a retest fo the 2.0330 intraday high.
Strategy: Look to get bullish after a drop below 2.0243, against 2.0159, target above 2.0654
USDCHF
London Commentary: The count that calls for a new low (below 1.1815) continues to track well. Continue to favor the downside and a break of 1.1815. A bearish objective is at 1.1793 (161.8% extension of 1.2215-1.1993/1.2151). Resistance should be strong up to 1.1925 (former congestion). The next day could see some choppy trading take place in the wave 4 position before a test of 1.1815 and lower. Still though, favor the downside.
New York Update: Consolidating at the 1.1850 support figure, upside momentum looks to be in the making. Although the longer term bias remains bearish, the short term pop should set the pair up for another round of selling. En route to the 1.1795 aforementioned target, we look for a confirmed penetration below the 1.1850 figure in supporting another leg lower. Any comparative upside would require a breach of the 1.1900 support trendline, purporting targets above at the 1.2000 resistance.
Strategy: Remain bearish, move risk to 1.1993 (from 1.2151), target 1.1795
USDCAD
London Commentary: There is nothing to add to the USDCAD as range is the order of the day. The head and shoulders continuation pattern is on the verge of confirmation as price has tested the neckline this morning. However, the structure of the decline is not clear, which makes going with this break dangerous. The longer term wave structure also gives scope to a major reversal. This is why we favor playing a break above 1.0676.
New York Update: Finding considerable resistance at the 1.0587 trendline, the USDCAD has fallen back slightly heading into the New York afternoon. With an imminent test at the 1.0500 psychological support, fortunes for the pair look to turn around as bolstered by momentum indicators on what seems to be a rigid level. This should help set the pair up for another leg higher, an advance that would touch upon the 1.0676 aforementioned target.
Strategy: Bullish on a break above 1.0676, against 1.0340, target TBD
AUDUSD
London Commentary: The AUDUSD has broken below the short term support line drawn off of the 8/29 and 8/31 lows. The rally from last night?s low (.8174) appears corrective so favor the bear side from current levels. We expect the entire rally from .8051 to be fully retraced.
New York Update: With momentum indications mixed in afternoon trading, we continue to remain bearish on the currency pair as it advances to test the 0.8300 figure at the close. A failure to take out the resistance trendline would purport a move lower, with a breach of the 0.8200 support trendline opening up scope to our initial target of 0.8051. Any upside would require a break above the 0.8309 intraday high.
Strategy: Bearish now, against .8285, target below .8051
NZDUSD
London Commentary: [I]On Friday, we wrote “look for a drop below .6834 to complete the decline from .7272, which would be wave b in the correction from .6639. Potential support is the 78.6% of .6639-.7272 at .6775. A strong rally in wave c is expected to register a new (above .7272).” Afer dropping below .6834, Kiwi has rallied back above .6900 this morning. However, keep risk tight as the rally to .6947 could be the end of a flat correction from .6834. We are showing that interpretation this morning. A bullish bias is warranted as long as price is above .6824.
[/I]New York Update: Building a strong case for the 0.7000 resistance trendline, the NZDUSD bid tone emerges on the heels of yen cross action with the pair bouncing from 0.6823 support in the overnight. A break above the psychological trendline would open up a bullish bias towards the 0.7100 trendline in the near term.
Strategy: Flat
Written by Richard Lee, Currency Strategist for DailyFX.com