“Dollar Turns – Look For Continuation”

Technical Overview

• Euro Topped?
• Japanese Yen 119 is Key
• British Pound Falters Before 1.9700
• Swiss Franc Reversal at 61.8%
• Canadian Dollar Nearing Important Support
• Australian Dollar Indecisive
• New Zealand Dollar In Small 5th Down



EURUSD – Our analysis from yesterday that “a likely level for a reversal is 1.3257/64. 1.3257 is the 78.6% fibo of 1.3364-1.2865 and 1.3264 is the monthly R1 pivot. Additionally, the 61.8% extension of waves 1 through 3 is at 1.3253 (1.3081 + (.618 x (1.3190 – 1.2911))” has proved correct so far. A break below yesterday’s low at 1.3160 would bolster the bearish case. Near term resistance is at former intraday support of 1.3211. Yesterday’s high at 1.3262 needs to hold in order for the bearish structure to remain intact. Short term bearish support on a break below 1.3160 is at 1.3080. Also keep in mind that this decline is expected to take prices below 1.2865 (eventually and barring a break above 1.3262).

USDJPY – The vicious decline from 121.66 looks like a C wave that completed the correction of strength from 122.21. Price has held near the previous 4th wave low at 117.98 (dipping below to 117.49 intraday yesterday). Additional support is at the 200 day SMA (117.36), the 61.8% of 114.42-122.21 at 117.41, and a potential trendline drawn off of the May 2006 and December 2006 lows. That line is at 116.69 today and increases about 2 pips per day. With the shelf of support just below current price, risk is now to the upside. A break above 119.00 warrants a bullish bias.

GBPUSD – The longer term wave structure suggests that a major top is in place at 1.9915. In fact, the rally from 1.8090 traced out an ending diagonal. Ending diagonals are often fully retraced. A decline below 1.9260 strongly suggests that a top is in place at 1.9915. The rally to 1.9675 may have completed a correction of the 1.9915-1.9401 decline. Only a decline below 1.9401 gives scope to more additional potential.

USDCHF – From yesterday “the pair is currently in the C wave position of the A-B-C correction. Although the pair has bounced this morning at the 50% fibo of 1.1878-1.2575 at 1.2227, the intraday charts suggest that the decline has more to go. Watch the 61.8% fibo of 1.1878-1.2575 at 1.2145 for a bottom.” Price has rallied over 60 pips off of yesterday’s low at 1.2144 but price needs to rally above the 2/20 low at 1.2312 to more confidently say that at least a near term low is in place. Still, downside risk is limited.

USDCAD – The USDCAD is most likely in a wave 3 that has the potential to reach the 161.8% extension of wave 1 at 1.1297 in the next few weeks (1.1719 – (1.618 x (1.1879 – 1.1620)). 1.1719 needs to hold in order for the near term bearish outlook to remain intact. Potential support prior to 1.1297 is the point where the decline from 1.1719 would equal the 1.1879-1.1620 decline. This is at 1.1458, which intersects with both the 50% of 1.1028-1.1879 at 1.1455 and the 7/24/2006 high at 1.1461. Resistance shifts to the 61.8% of 1.1879-1.1564 at 1.1758 on a rally above 1.1719.

AUDUSD – As long as price remains above .7827, the potential exists for a wave 5 rally to above .7950 before a larger pullback. On the other hand, .7827 is the bearish pivot. Daily CCI has rolled over from above 100, which is often a reliable turn signal. In the very short term, it looks like a 5th wave down from .7887 will take price below .7853.

NZDUSD – Analysis is unchanged from yesterday – “Given the long term head and shoulders pattern along with the 78.6% fibo of .7470-.5927 at .7138, it is possible that Kiwi is near a major top. The best interpretation on the daily accounts for an extended wave 1 from .5927. As mentioned with the USDJPY, a correction following a 5 wave sequence where the 1st wave is extended tends to bottom near the bottom of the 2nd wave. Thus, expectations are for a decline to .6528 from near current price. The 78.6% fibo at .7138 is risk.” Similar to the AUDUSD, it looks like a small 5th wave is working down (from .7028).