US Dollar Bullish Divergence and Channel Support Indicate Rally

  • Euro Channel Resistance
  • Japanese Yen Triple Bottom (USDJPY Triple Top)
  • British Pound at Channel Support
  • Swiss Franc Triple Top (USDCHF Triple Bottom)
  • Canadian Dollar One Way Train
  • Australian Dollar Below .8300
  • New Zealand Dollar Channel Resistance

EURUSD - We are still focused on channel resistance that dates to the May 2006 high. The rally stalled at this level last week and the spinning top candle on Wednesday also warns of at least a correction. The monthly chart (using USD/DEM prices before 1999) shows a potential triple top with the July 1995 (1.3822) and December 2004 (1.3670) highs. Daily RSI remains divergent with recent peaks and has declined from above 70. The technical evidence for a reversal is stronger when one considers the complete one sided sentiment (speculative positioning is at a new record for euro longs for the third week in a row now).

USDJPY - The USDJPY broke out from the 118.22-119.03 consolidation in what could be the C wave of an A-B-C triangle. Remaining below 119.84 warrants a bearish bias for expectations of the reversal from the triangle breakout. The short term triple top at 119.74 also gives scope to more bearish potential. 119.84 is risk with former resistance at 119.03 serving as potential support. A potential head and shoulders reversal is visible on the daily.

GBPUSD - Cable has held at channel support so far, bouncing off of the 1.9900 figure this morning. Channel support along with the 3 wave decline from the top to 1.9864 keeps us looking higher but 1.9864 must hold for the bullish structure to remain intact. A break at 1.9864 exposes former resistance (now potential support) at 1.9822.

USDCHF - The USDCHF has put in a short term triple bottom near 1.2000 and rallied through trendline resistance to test the 1.2100 figure this morning. 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.

USDCAD - There is little change regarding the USDCAD. There is little doubt that the decline from 1.1825 is a 3rd wave. Therefore, any rally should be treated like a correction as a 5th wave decline will eventually take the USDCAD to lower levels. Initial resistance is the 4/24 high at 1.1246. With RSI putting in a momentum extreme on 4/25 at 19.91 (daily), downside potential looks limited as the next few weeks may be dominated by sideways/corrective trading in order to correct the oversold condition (daily). The next support level is the 9/28/2006 low at 1.1086.

AUDUSD - The AUDUSD has bounced from the 20 day SMA but it remains our contention that the AUDUSD is reversing from a significant top. Weekly RSI is divergent and above 70 for the first time since November 2004. The rally from .7678 is an extended 5th wave, which are often fully retraced.

NZDUSD - The break below the 2 month trendline and the bearish MACD crossover (daily) along with RSI declining from above 70 suggest that we look lower. Kiwi has also held below channel resistance. The evidence warrants a bearish stance against the 4/18 high at .7491. Former resistance at .7313 is now potential support.