EUR/USD ââ,¬â€œ This morningââ,¬â"¢s strength favors the bullish scenario that we proposed yesterday.  That is, the rally from 1.3051 may be the beginning of the ââ,¬Å"5th of the 5thââ,¬Å" that will eventually challenge 1.3367.  1.3051 must hold as support for the bullish structure to remain intact.  The next hurdle for bulls is the 12/20 high at 1.3244.  Resistance is reinforced by the 61.8% fibo of 1.3367-1.3051 at 1.3245.  1.3244/45 is an important pivot to watch.  If the EURUSD bursts through, then 1.3367 is in sight.  If the pair is rejected, then it is likely that 1.3367 is an important top and that a multi-week (possibly multi-month) correction lower is in the works.

USD/JPY ââ,¬â€œ The year long inverse head and shoulders pattern remains intact and a break above the neckline, a resistance line drawn off of 121.38 and 119.87, warrants a longer term bullish bias.  Short term price action may be dominated be bears though as 5 waves up are visible from 114.42.  A decline into fibo resistance, beginning at the 38.2% of 114.42-119.21 at 117.38, is appropriate.

GBP/USD ââ,¬â€œ A large 5 wave sequence began at 1.7046 in November of 2005.  Like the EURUSD, 5 wave can be counted from that low ââ,¬â€œ thus downside risk outweighs upside potential.  However, the sub waves of the 5th wave that began at 1.8515 are clearer.  The decline from 1.9846 is likely the 4th wave (of the larger 5th) that will lead to the ââ,¬Å"5th of the 5th ââ,¬Å".  In fact, the bottom of the 4th wave is likely in place at 1.9432.  A breach of 1.9432 negates the bullish stance.

USD/CHF ââ,¬â€œ The USDHCHF rally has stalled at the 38.2% of 1.2768-1.1878.  The reverse hammer candle at the fibo (1.2218) on 12/18 forewarned of weakness.  Price has held below the 12/18 high of 1.2267 (on a daily closing basis), which reinforces the bearish bias.  A drop through 1.2110 bolsters the bearish stance.

USD/CAD ââ,¬â€œ The USDCAD has reached the 38.2% of 1.2730-1.0927 at 1.1616.  While the larger bullish bias remains intact above 1.1428 (this keeps the sequence of higher lows intact), daily oscillators nearing overbought territory at the fibo level warn of a temporary top.  A larger downward channel may be forming as well.  The support line would be drawn off of the November 2004 and May 2006 lows (1.1716 and 1.0927).  A parallel line extended from the May 2005 high at 1.2731 intersects with the 50% fibo of 1.2731-1.0927 at 1.1830 in late January (2007 of course).

AUD/USD ââ,¬â€œ The AUDUSD continues to consolidate gains.  The shorter term bullish bias remains intact as long as price remains above the 11/4 high of .7766.  There is potential for a larger 5th wave rally to above .7929 as long as price remains above .7766.  Focus would then shift to the 2004 high at .8003.

NZD/USD ââ,¬â€œ The Kiwi continues its assault on the US dollar as the next stop for bulls is the February 2004 high at .7098.  There is a lot of congestion between .7098 and the December 2005 high at .7198.  Daily RSI is in overbought territory but a cross back below 70 is required to give a bearish signal.  A steep bullish channel has formed from the 6/28 low at .5927.  The support line from that channel is at .6765 today and increases about 5 pips per day.

Jamie Saettele is a Technical Currency Analyst for FXCM.