Euro To Challenge 1.3680
Commentary: We wrote Friday that “we are expecting wave 4 to end somewhere near 1.3528/49, which is the former 4th wave and the 38.2% of 1.3371-1.3659 (wave 3). Wave 5 is expected to exceed 1.3680 before a longer term reversal takes hold.” The bottom was put in at 1.3568 and the EURUSD is back above 1.3600 now. There is no change to our outlook for a new high (above 1.3659 and then 1.3680) before the longer term reversal.

Strategy: If already bullish, remain so as long as price is above1.3568.

Japanese Yen Channel Is Key
Commentary: With the dominant pattern being the 3 wave decline from 124.13 to 122.09, we are looking higher as long as channel support (see chart above) holds. A break above 124.13 would expose the next level of chart resistance from the December 2002 high at 125.73. Limit risk to channel support as positioning is extreme (specs extremely short JPY and commercials long JPY), which indicates the high probability of a reversal in the weeks ahead.

Strategy: Remain bullish, against 122.09, target 125.60

British Pound Short Term Bull Above 2.0056
Commentary: There is no sign yet of a reversal but the long term structure indicates reversal potential. The upper resistance line for an ending diagonal from 1.8515 is at 2.0338 today (see previous day’s commentary for more on this pattern). Short term, a cautious bullish stance is warranted against 2.0056. Be careful though because a push through 2.0203 would satisfy minimum expectations.

Strategy: Flat

Swiss Franc Correction Complete?
Commentary: We wrote Friday that “we are treating the rally from 1.2091 as a correction, which means that we expect new lows either today or next week. Fibonacci resistance is at 1.2238 (38.2% of 1.2476-1.2091), 1.2284 (50%) and 1.2329 (61.8%). Look for a reversal of recent strength near one of these levels.” The countertrend movement may have ended at 1.2232. If 1.2232 fails to hold, then a complex correction is playing out and we would look for resistance closer to the 61.8% at 1.2329.

Strategy: Bearish now, against 1.2232, target below 1.2091.

Canadian Dollar Channel Line at 1.0393 This Week
Commentary: We were too early in calling the turn but we still expect a reversal. The weekly chart shows why. A 5 wave decline from the 2002 high is nearing its end as evidenced by the ending diagonal (i-ii-iii-iv-v). RSI divergence is also evident on the weekly. A rally through 1.0756 would strongly suggest that a low is in place. We are looking for a 5 wave rally to get bullish against.

Strategy: Flat

Australian Dollar Testing Resistance Line
Commentary: The short term pattern is not clear so we are focusing on the longer term chart right now. The impulse rally that followed the break of the triangle began in June 2006. Impulse rallies will either unfold in 5, 9, or 13 waves (these are all derivations of 5 waves - 9 would indicate an extended wave - 13 would indicate 2 extended waves, etc). So far, there are just 7 waves. This means that we are looking for a corrective down leg to be followed by a rally to a new high. When the down leg will begin is anyone’s guess. The best opportunity in the AUDUSD in the next few weeks will be to wait for the corrective decline to unfold before getting bullish for a run at a new high.

Strategy: Flat

New Zealand Dollar Supported at .7800
Commentary: The short term pattern is not clear so we are focusing on the longer term chart right now. The impulse rally that followed the break of the triangle began in June 2006. Impulse rallies will either unfold in 5, 9, or 13 waves (these are all derivations of 5 waves - 9 would indicate an extended wave - 13 would indicate 2 extended waves, etc). So far, there are just 7 waves. This means that we are looking for a corrective down leg to be followed by a rally to a new high. When the down leg will begin is anyone’s guess. The best opportunity in the AUDUSD in the next few weeks will be to wait for the corrective decline to unfold before getting bullish for a run at a new high.

Strategy: Flat

Jamie Saettele is a Technical Currency Analyst for FXCM.