EURUSD
London Commentary: The last two days comments on the EURUSD have started out with “there is no reason to change the outlook at this point for a new high (above 1.3852)?”. Still, we had favored a bigger pullback in hopes that those on the sidelines could get in at a favorable reward/risk ratio. However, the EURUSD continues to rally and is approaching the 1.3900 figure. Measured resistance is at 1.3910 (100% extension of 1.3360-1.3719/1.3551). There is potential for a rally to the 161.8% at 1.4132 as well, but likely next week. See our special technical report on the EURUSD from Friday at EURUSD 1.40 for more analysis.
New York Update: Although longer term bullishness remains in tact, the EURUSD may be set for a leg lower in the near term as per momentum indications. Already stalling just above the 1.3900 figure, downside targets remain just below at the 1.3891 support trendline with considerable barriers at the 1.3850 level. Support is reinforced considering the 1.3572-1.3662 rising trendline. Any further upside would see a breach of the 1.3913 top before making an attempt on the 1.4000.
Strategy: Remain bullish, move risk to 1.3824 (from 1.3663), no target?we?ll keep moving up the stop until we are stopped out
USDJPY
London Commentary: We wrote yesterday that “a small triangle has unfolded following the rally from 112.59. Look for a terminal thrust from the triangle to test the 61.8% of 115.63-112.59 at 114.47 before a top and reversal. The larger bearish bias is strong as long as price is below 115.63. We expect a drop under 112.59 following a top and reversal near 114.47.” The USDJPY reversed at 114.38 and a bearish bias is warranted against there targeting a drop below 112.59.
New York Update: Stalling just below the 114.50 resistance trendline, the USDJPY bearish signals continue to permeate, with sellers looking for tests of initial barriers at the 113.78 low. A breach lower would open scope for more declines to the 113.50 support trendline, eventually coming to stop at the 112.59 aforementioned level. However, should the pair break through the 114.36 intraday ceiling to the upside, bidders will prop up the pair to the 115.00 before any retrace is to occur.
Strategy: Bearish now, against 115.63, target below 112.59
[B]GBPUSD
London Commentary:[/B] [I]While the EURUSD marches higher, Cable is shuffling higher. We proposed yesterday that the pair might be ready to accelerate higher in a 3rd wave from 2.0235. The lack of upside acceleration makes confidence in this pattern low right now though. A bullish bias is warranted above 2.0285 but we would like to introduce an alternate pattern. The wedge shape of the rally from 2.0043 could be an ending diagonal in wave C within an A-B-C from 1.9651. It is also possible that the diagonal is wave i within a 5 wave bullish cycle from 2.0043. Either way, a pullback to at least 2.0235 is expected.
[/I]New York Update: Bullish bids are emerging in the GBPUSD as supported by oversold momentum indications with the currency pair hovering just above the 2.0300 support trendline. As a result, further upside is likely to be targeted on a break of the 2.0365 session high placing the 2.0394 August 9th high into play. Any downside move looks to be minimized by barriers at the 2.0261 Sept. 10 hourly low.
Strategy: Remain bullish, move risk to 2.0285, target above 2.0654
[B]USDCHF
London Commentary:[/B] The count that calls for a new low (below 1.1815) continues to track well as the USDCHF traded as low as 1.1817 this morning. 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). Still, this decline from 1.1898 is wave 5 in the 5 wave decline from 1.2151 so risk of an upward correction back to 1.1900 or so increases with every tick lower.
New York Update: Keeping within the range price action that has persisted over the past week, the USDCHF is looking bullish in the near term. Already bouncing off of support at the 1.1834 trendline, the pair looks to test upside potential at the 1.1898 resistance top, with a breach above likely to place intermediate barriers at the 1.2000 into play. Downside breaks would be in line with our longer term view as we target the 1.1795, about 60 basis points lower.
Strategy: Remain bearish, move risk to 1.1879, target 1.1795
[B]USDCAD
London Commentary:[/B] [I]The break of the head and shoulders neckline is real. We wrote about the neckline break yesterday and also mentioned that “the decline from 1.0591 looks impulsive. Favor the downside for a test of 1.0340 as long as price is below 1.0591.” 5 waves lower appear complete from 1.0591 so a bounce to the former 4th wave at 1.0445 is expected before the next move lower. Where this 5 wave decline fits in the larger structure is not completely clear but 5 waves down is evidence that the trend is down and that rallies should prove corrective. Additional resistance is the 61.8% of 1.0591-1.0394 at 1.0516. Favor the downside as long as price is below 1.0591 for a test of 1.0340.
[/I]New York Update: Failing to break below the 1.0350 support figure, the USDCAD pair is looking ripe and ready for a pullback to the upside. Although the retracement is not likely to establish any intermediate trends, we are setting short term targets at the 1.0400 barrier heading into afternoon trading. Momentum indications are supportive of the notion, ticking higher above oversold barriers.
Strategy: Flat
[B]AUDUSD
London Commentary:[/B] We wrote yesterday that “the pattern since the 8/27 high at .8333 is certainly corrective but so is the rally leg from .7673 to .8333. The evidence suggests that a large complex correction is unfolding and that there will be one more rally leg (above .8333).” The Aussie has pushed through .8333 and the next level of potential resistance is at the 61.8% of .8870-.7673 at .8413. Near term support is .8324. A corrective decline to this level would warrant a bullish stand against .8171.
New York Update: Already higher by 200 basis points over the course of the week, the AUDUSD currency pair is set for a mild pullback as it runs into barriers at the 0.8433 intraday high. Confirmed by momentum indicators, the notion purports a highly probable test at the 0.8374 support trendline with capping at the 0.8340 38.2% fib from the 0.8191-0.8431 impulse.
Strategy: Flat
[B]NZDUSD
London Commentary:[/B] The Kiwi structure is unfolding as expected. That is, the rally from .6824 is impulsive (5 waves), indicating additional upside potential. The sideways consolidation that has taken place since last night is most likely a small 4th wave that will lead to a slight new high. A small correction is then expected but the trend is up unless .6824 is broken.
New York Update: A similar situation has already begun to unfold in the NZDUSD currency pair as price action has come across stiff resistance at the 0.7159 intrasession high. Initial tests at the 0.7081 support trendline are in play with a breach lower putting bearish sights on the 0.7034 38.2% fib of the 0.6837-0.7156 impulse.
Strategy: Bullish now, against .6824, target above .7272
Written by Richard Lee, Currency Strategist of DailyFX.com