USDJPY Strength Could Persist Until 119.00 Next Week

[B]- Euro Could Still Test 1.3750

  • Japanese Yen Could Correct to 119.00 Next Week
  • British Pound 2.0270 Potential Reversal Point
  • Swiss Franc Large Triangle is Dominant Pattern
  • Canadian Dollar Choppy Range is Risky
  • Australian Dollar Advancing Correctively
  • New Zealand Dollar Short Term Bullish Against .6869[/B]

Commentary: Potential remains for a push to the 1.3750 area before a reversal back towards at least 1.3463. The rally from 1.3360 may be an initial 5 wave advance within a larger rally sequence but even if that is the case, a correction would be expected to play out to at least 1.3563 (former 4th wave). The structure of the decline from 1.3718 will give us a better idea of the larger trend. A break of the short term supporting trendline would warrant a bearish bias.

Strategy: Flat

Commentary: Bigger picture, the USDJPY has traced out 5 waves lower (which is large wave 1)from 124.13 to 111.59, indicating a large degree trend change. Since the low at 111.59, it is our contention that an A-B-C correction is unfolding as large wave 2. Within this A-B-C, wave C might be underway from 113.86. We wrote yesterday that “a break above 116.24 warrants a bullish stance against 115.22, targeting 119.34 (61.8% of 124.13-111.59) for the completion of wave C (wave 2). The best opportunity will be to the downside for wave 3 lower. This most likely will not present itself until next week.” The pair did break above 116.24 so favor the upside until 119.34 (we will look for a top and reversal near there next week).

Strategy: Flat (waiting for wave 3 bearish opportunity)

Commentary: The structure of Cable is virtually the same as the EURUSD. That is, in the intermediate term, we expect both pairs to turn lower and head much lower. However, just as the EURUSD seems poised to test 1.3750, the GBPUSD appears that it will continue towards the 61.8% of 2.0654-1.9651 at 2.0271 before reversing to at least 1.9961. We can not ignore the fact that setbacks since 8/17 have occurred in 3 waves. 3 means indicates countertrend movements, therefore the near term trend is pointed higher. In summary, look for a top and reversal near the 61.8% of 2.0654-1.9651 at 2.0271 with the initial bearish objective at 1.9961.
Strategy: Remain bullish, move risk to 2.0043, (from 1.9961), target 2.0271 and 2.0439 (move to BE after T1 hit)

Commentary: With price action remaining choppy on a short term basis, we are showing the daily chart today for perspective. The daily chart shows a clear 5 wave rally from the December 2004 low to the November 2005 high. Everything since has been a correction. However, the correction is not complete. A complex correction has unfolded from the November 2005 high (W-X-Y). Wave X is a triangle, which means that we should expect a terminal thrust lower to complete the correction. The thrust to 1.1815 is most likely just the first leg of wave Y lower. As such, we are looking for price to come under 1.1815 before any meaningful bottom is in place.

Strategy: Flat (best idea here is to sell breaks lower?.first bearish pivot at 1.1960)

Commentary: Near term USDCAD price action is choppy and corrective as well, which makes trading this pair on a short term basis risky right now. When price action is choppy, we prefer to sit tight and wait for a clearer pattern to emerge. The longer term charts (we are showing the weekly today) indicate that a significant bottom may be in place at 1.0340. A rally above 1.0676 most likely leads to a break above 1.0866. Short term, there is a possible head and shoulders continuation pattern, which is bearish. This pattern would suggest a retest of 1.0340 is in order before a reversal occurs.
Strategy: Flat

Commentary: The AUDUSD is correcting the .8870-.7673 decline. The 3 wave movements at varrying degrees of trend make this clear. There are a number of possibilities right now, too many to take a strong stand one way or the other. Price could come under .8051 to test the 61.8% of .7673-.8333 in a b wave before proceeding higher in wave c to complete the correction from .7673?.or a b wave bottom may already be in place and price could continue higher from above .8051 to complete the c wave. A rally through .8234 favors the latter scenario and a drop under .8051 favors the former.
Strategy: Flat

Commentary: Naturally, the Kiwi is in the exact same position as the AUDUSD. Since the NZDUSD already tested the 61.8% of .6639-.7272 at .6881, it seems more likely that a B wave low is already in place at .6869 and that price is headed higher in wave C to test .7500 before a reversal. .7501 is the 100% extension of .6639-.7272/.6869 and .7547 is the 61.8% retracement of .8082-.6639.

Strategy: Remain bullish, against .6869, target .7500

***JTREND is a proprietary calculation that uses recent highs, lows and closes to determine the trend. JTREND uses the last 4 weeks of price data (highs, lows, closes). An example is below. Blue bars denote bullish trend and red bars denote bearish trend. The chart below is the EURUSD weekly chart.

Written by Jamie Saettele, Technical Currency Strategist of