Tight Ranges Could Lead to Breakouts

  • Euro Tests Former Trendline
  • Japanese Yen Digests Losses
  • British Pound to 1.9900?
  • Swiss Franc In Correction
  • Canadian Dollar Fluctuates Around 1.0700
  • Australian Dollar Bullish Above .8396
  • New Zealand Dollar Rally Has Been Choppy


[B]Commentary[/B]: The bounce from 1.3261 has stalled just below the 61.8% of 1.3552-1.3261 at 1.3441. The 21 day SMA at 1.3418 has also held as resistance. Two weeks ago, the EURUSD broke below a support line drawn off of the October 2006 and January 2007 lows. The pair has come back to test the other side of the line as resistance. The longer term bearish bias is intact as long as price remains below 1.3552.

[B]Strategy[/B]: Bearish on a break below 1.3261

[B]Commentary[/B]: “It is our working assumption that the USDJPY is working higher in a C wave towards the 128.00 area over the next few weeks/month. The 78.6% of 135.13-101.67, the 100% extension of 108.98-122.17/115.14, and the 100% extension of 101.67-121.39/108.98 are between 127.97 and 128.70.” Near term, 122.82-123.30 should provide solid support.
[B]Strategy[/B]: Looking to align with bull trend between 122.82 and 123.30

[B]Commentary[/B]: Cable?s rally looks impusive and the next level of resistance is 1.9891/1.9912. This is the 78.6% of 1.9964-1.9621 / 161.8% extension of 1.9621-1.9780/1.9655. Coming under 1.9780 would signal that bears are back in control. As long as price is below 1.9964, the longer term turn bearish bias is intact.
[B]Strategy[/B]: Bearish now, against 1.9964, target TBD

[B]Commentary[/B]: The USDCHF reversed last week just before the 100% of 1.1993-1.2329/1.2145 at 1.2481. We wrote last week that “since the USDCHF has stalled just below the 100% extension (1.2481), be wary of a pullback towards. A small c wave is expected to bring price back to the former 4th wave at 1.2372. This is a good point to either add to longs or initiate longs.” The USDCHF may have more downside potential than initially thought. Additional support is at 1.2350 and 1.2311 (38.2%-50% of 1.2145-1.2476).
[B]Strategy[/B]: Move to flat (previously bullish)

[B]Commentary[/B]: We still maintain that “the 4th wave correction of the 1.1825-1.0548 decline is underway. The projected end for wave 4 is 1.0849-1.1036. 1.0849 seems more likely since that level intersects with channel resistance this week.” Friday?s low at 1.0601 is the bottom of wave b within the larger wave 4.

[B]Strategy[/B]: Bullish, against 1.0548, targeting 1.0800

[B]Commentary[/B]: Our assumption is that a correction ended at .8332, which is the 100% extension of .8476-.8365/.8447. We wrote last week that “once we see evidence of an impulse rally, we will get bullish against the swing low (which is .8332 now). A rally through .8447 warrants bullish action.” The rally fom last week?s low is is impulsive, and strongly indicates that at least one more 5 wave rally is expected with .8332 remaining intact. We are keeping risk confined to .8396 (which is the low of wave ii).
[B]Strategy[/B]: Bullish now, against .8396 target TBD

[B]Commentary[/B]: From Friday: “The 5 wave decline from .7637 to .7465 suggests that at least one more leg lower will occur. An irregular flat correction may be unfolding from .7465. Potential reversal points are .7551 and .7571 (the 50% and 61.8% of .7637-.7465). We are bearish from .7535 and targeting .7262, which is the 161.8% extension of .7637-.7465/.7540. The 100% extension is at .7368 and may also be support so keep risk tight if price falls below .7400. In summary, we are looking for a spike above .7540 before price reverses and heads lower.” The high today was .7571 so our wave count is tracking nicely. The bearish targets are revised to .7399 and .7293 (which are the 100% and 161.8% extensions of .7637-.7540/.7571.
[B]Strategy[/B]: Bearish at .7535, against .7637, targeting .7262.

*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.