Euro 5 Waves Up Points Higher
Commentary: We are abandoning the bearish stance now due to the 5 wave rally from 1.3261-1.3437. A small correction may be happening now, but support should be strong near the previous 4th wave at 1.3383. We wrote in a special report two weeks ago that “1.3264 holds and price rallies back to 1.3392, then we would switch to the alternate count which has an ending diagonal unfolding from 1.2482.” That is what we are doing now. We expect a test of 1.3680 before a larger turn lower.

Strategy: Bullish, against 1.3261, targeting 1.3680

Japanese Yen Should Range Near Term
Commentary: “It is our working assumption that the USDJPY is working higher in a C wave towards the 128.00 area over the next few weeks/month. The 78.6% of 135.13-101.67, the 100% extension of 108.98-122.17/115.14, and the 100% extension of 101.67-121.39/108.98 are between 127.97 and 128.70.” We wrote yesterday that “near term, 122.82-123.30 should provide solid support.” The USDJPY slipped to 123.09 this morning and has shot up past 123.50. Once 123.73 is broken, we expect a larger correction, so now is not the time to position for a run to 128.00.

Strategy: Bullish at 123.30, against 123.09, target 123.73

British Pound Breaks Through 1.9900
Commentary: We wrote yesterday that “Cable’s rally looks impulsive and the next level of resistance is the 161.8% extension of 1.9621-1.9780/1.9655 at 1.9912.” The pair has traded through this level in what is a small wave iii from 1.9655. Some consolidation in a wave iv is expected before another rally leg. Similar to the EURUSD, we are abandoning the bearish bias now. Support should be strong near 1.9867. Ultimately, we expect a test of 2.0131 before a larger turn down. Look to align with bulls on a 3 wave correction between 1.9827 and 1.9867.

Strategy: Look to align with bulls on a 3 wave correction between 1.9827 and 1.9867.

Swiss Franc Continues to Correct
Commentary: There is no change in the USDCHF as the pair is tracking our count. “The USDCHF may have more downside potential than initially thought. Additional support is at 1.2350 and 1.2311 (38.2%-50% of 1.2145-1.2476).” A longer term bullish outcome remains possible as long as price is above 1.2145 but near term, the path of least resistance looks like it is down.

Strategy: Move to flat (previously bullish)

Canadian Dollar Back on the Offensive?
Commentary: It is possible that a double zigzag correction is complete at 1.0750 in the wave 4 position (of the 5 wave decline from 1.1879). If this is the case, then the USDCAD will make a new low (below 1.0548) in order to complete a larger 5 wave decline that began in 2002 at 1.6189. A projected end for the decline is just below 1.0400. This is where channel support from November 2004 comes in. If 1.0750 does not hold, then the next level of resistance is the 23.6% of 1.1825-1.0548 at 1.0850. Short term resistance is between 1.0665 and 1.0698 (shown on short term chart above).

Strategy: Bearish, against 1.0750, targeting below 1.0548 (TBD)

Australian Dollar Short Term Support Line
Commentary: It is possible that a double zigzag correction is complete at 1.0750 in the wave 4 position (of the 5 wave decline from 1.1879). If this is the case, then the USDCAD will make a new low (below 1.0548) in order to complete a larger 5 wave decline that began in 2002 at 1.6189. A projected end for the decline is just below 1.0400. This is where channel support from November 2004 comes in. If 1.0750 does not hold, then the next level of resistance is the 23.6% of 1.1825-1.0548 at 1.0850. Short term resistance is between 1.0665 and 1.0698 (shown on short term chart above).

Strategy: Bearish, against 1.0750, targeting below 1.0548 (TBD)

New Zealand Dollar Confusing Near Term, Watch Long Term Resistance Line
Commentary: Kiwi has really been confusing lately. The 5 wave decline from .7637 to .7465 suggested to us that at least another 5 wave decline was going to occur with .7637 remaining intact. This could still happen but with Kiwi pressing up against .7600, our confidence in the bear side is low. We do not have a strong opinion on NSDUSD at the moment as the rally from .7452 is sloppy so we are looking at the daily chart for perspective. Watch the resistance line drawn off of the May 2006, April 2007, and June 2007 highs for a potential reversal. If the pattern clears up, then we will write about here.

Strategy: Bearish at .7535, against .7637, targeting .7262 (but not too confident right now)

Jamie Saettele is a Technical Currency Analyst for FXCM.