Yen Breaking From Consolidation - Next Big Move Underway?

• Euro Treads Water
• Japanese Yen Breaking Out
• British Pound Still Bullish Short Term
• Swiss Franc Gets a Bid
• Canadian Dollar Channel Support is Key
• Australian Dollar Major Top?
• New Zealand Dollar a Small 5 Wave Decline?

EURUSD – 1.3400 has proven formidable as resistance and there is no change in our outlook. “There is plenty of bearish evidence on the daily. RSI is divergent at the recent high and just declined below 70. CCI is above 100 and a decline below 100 would signal a reversal. Regarding the longer term structure, it is appropriate to treat the entire rally from 1.1640 as a 3 wave correction. There are 7 waves higher – but 7 divides into two 3 wave corrections linked together by an X wave. This is known as a double zigzag correction and is labeled W-X-Y. We are looking lower. It is possible that the rally extends higher but the oscillator action on the daily gives us reason to be skeptical.” That said, the shorter term structure remains bullish due to the 3 wave decline from 1.3413 to 1.3254. This evidence indicates that a rally above 1.3372 eventually leads to a break of 1.3413. Treat 1.3372 as the bullish pivot and 1.354 as the bearish pivot.

USDJPY – The break below 117.39 as well as short term channel support favors our initial bearish outlook that treats the rally from 115.76 as corrective. We are now looking for the rally from 115.76 to be completely retraced but initial support is at 116.70/80 (potential triangle support). Former intraday support from last night is now resistance at 117.65 and bears are firmly in control as long as price remains below 118.01.

GBPUSD – We are still looking for one more high to be registered above 1.9729 before a big turn lower. We are looking higher in order for a 5th wave to complete a 5 wave bullish sequence that began at 1.9243. Wave 1 would equal wave 5 at 1.9823. The bullish structure is strong above 1.9569. The 3 wave setbacks from 1.9729 and 1.9726 both favor the short term bullish outlook.

USDCHF – The USDCHF dropped below our short term trendline and the rally from 1.2030 to 1.2230 is in just 3 waves. The evidence requires that we abandon our bullish stance. The 20 day has held as resistance as well (currently at 1.2189). The short term structure does not look too clear at this point but the aforementioned 3 wave rally suggests that the 1.2030 low will be tested again.

USDCAD – This big decline is likely the C wave of an A-B-C decline from 1.1879. 1.1512 is where the C wave decline would equal the A wave decline. Support is reinforced by the confluence of channel support / 11/21/2006 high at 1.1470. RSI (daily) is nearing oversold territory and CCI (daily) is below -100. The pair is likely to chop lower to test the mentioned support near 1.1470/1.1512 before a major rally attempt. A rally through 1.1679 (3/13 low) suggests additional bullish potential.

AUDUSD – Focus remains on .8130 but the Aussie is nearing the latter stages of a long term rally. Daily RSI has crossed above and then below 70 (overbought) for the first time since November 2006. The rally from .7680 is in 5 waves and could be the end of the 5th wave in the 5 wave bullish sequence that began in April 2001 (see chart below). If this is the case, then we are near a major top and the next big move is towards .7000. There is no evidence yet that a top is in place – we’ll require a 5 wave decline (even at the smallest degree) in order to claim that a top is in place.

NZDUSD – We showed the risk reversal chart yesterday, which is one of the main reasons that we are looking for a top. The pair was rejected at the .7200 figure and currently trades roughly 70 pips lower. Is this the turn? Maybe. A decline in the next few hours to below .7110 would make the decline from .7207 5 waves and suggest that this is indeed the turn. A rally above .7183 before a decline below .7110 would negate the call for a top.