EUR/USD â,“ The EURUSD is little changed after yesterdayâ,"s outside day. Tight Bollinger bands on the daily indicate breakout potential. A shorter term triangle (shorter term than the one discussed yesterday) has formed following the 8/10 high at 1.2911. The apex is at 9/25. Following the theory that price typically breaks through its triangle two-thirds to three-fourths of the way through the triangle, we would expect a breakout to occur anywhere from 9/11 to 9/15. With the trend leading up to the triangle up, we maintain a cautious bullish bias. A test of the lower end of the triangle is certainly possible at 1.2741 to complete 5 waves within the triangle. A break below there suggests that the triangle was a reversal pattern (rather than continuation).
USD/JPY â,“ The USDJPY probes the resisting line from 119.38. An inverse head and shoulders pattern has formed on the daily but it takes a break above the mentioned trendline to complete the pattern. In this instance, price probes the 118.87-119.38 zone. A break below the trendline from the 113.95 low â,“ currently at 116.40 â,“ is required to suggest that price is headed lower. Support is at the confluence of the trendline from 113.95 / 8/29 low at 116.49.
GBP/USD â,“ Yesterdayâ,"s doji (daily) may be the beginning of the end for bulls. However, price remains above the 8/16 high of 1.9023, which is a good point of reference (on a daily closing basis). Daily momentum is picking up as RSI nears 70. However, it is hard to ignore the bearish divergence with RSI on the hourly at each new high. A break below former resistance at the 1.9000 figure would begin to suggest that a reversal is in play, but only a break below 1.8775 (nearly 300 pips away) confirms a reversal. The latest COT readings (little commercial buying and extremely long speculative positioning) may also limit upside potential.
USD/CHF â,“ The USDCHF made its outside day as well yesterday. Volatility has contracted significantly as the pair is nearing the convergence of a resisting trendline from 3/10/2006 (1.3229) and a supporting trendline from 5/15/2006 (1.1919). The bias is neutral until a break. Immediate resistance is just above current price at the confluence of the 10 / 20 day SMAs at 1.2325/26.
USD/CAD â,“ From the last week â,"The 3rd corrective wave (beginning at 1.1319) would equal the first (1.1456-1.1170) at 1.1033. This is significant because the 78.6% fibo of 1.0927-1.1456 is at 1.1040 (just 7 pips away). This fits with the notion that initial moves at turning points are often retraced a large amount before a continuation. The initial move in this case is 1.0927-1.1456. USDCAD fell to 1.1049 last week and Fridayâ,"s candle is a spinning top at the lower Bollinger band (daily). The evidence points to a rally from nearby levels. Additional evidence that a bottom is forming is CCI rising from above -100 in recent days.â, Todayâ,"s low at 1.1028 may be the significant low discussed above. Wave structure warrants a bullish stance against 1.1028. A break below would expose 1.0960 and negate the immediate outlook. 1.1128 is initial resistance.
AUD/USD â,“ Price has broken above a short term trendline from .7699 and currently tests the same line from the other side as support. Immediate resistance is at a trendline from.7713 at .7660. A break above there negates the short term bearish bias. On the other hand, a short term trendline from .7549 (8/25 low) rests at .7610. Yesterdayâ,"s low is immediate support at .7608. It takes a breach of the 8/25 .7549 low to suggest that the trend is down. Regarding the longer term outlook - OT positioning indicates that AUDUSD may be topping out as the speculative community is extremely long of Australian dollars and commercial hedgers own very little of the currency.
NZD/USD â,“ Kiwi has rallied in what looks like a 5th wave advance that should be followed by a decent sized correction. That correction may have already started as price has decline roughly 40 pips from todayâ,"s high and hourly RSI is just now dipping below 50. Initial support is at the 8/16 high at .6439. A continuation of strength probes .6620 (where wave 3 (.6143-.6439) would equal wave 5 (beginning at .6328)). Daily RSI is now in overbought territory for the first time since 12/6/2005 â,“ when Kiwi topped out at .7198 before embarking on the decline to below .6000.
Jamie Saettele is a Technical Currency Analyst for FXCM.