Euro Could Still Test 1.3750
Commentary: Potential remains for a push to the 1.3750 area before a reversal back towards at least 1.3463. The rally from 1.3360 may be an initial 5 wave advance within a larger rally sequence but even if that is the case, a correction would be expected to play out to at least 1.3563 (former 4th wave). The structure of the decline from 1.3718 will give us a better idea of the larger trend. A break of the short term supporting trendline would warrant a bearish bias.

Strategy: Flat

Japanese Yen Could Correct to 119.00 Next Week
Commentary: Bigger picture, the USD/JPY has traced out 5 waves lower (which is large wave 1)from 124.13 to 111.59, indicating a large degree trend change. Since the low at 111.59, it is our contention that an A-B-C correction is unfolding as large wave 2. Within this A-B-C, wave C might be underway from 113.86. We wrote yesterday that “a break above 116.24 warrants a bullish stance against 115.22, targeting 119.34 (61.8% of 124.13-111.59) for the completion of wave C (wave 2). The best opportunity will be to the downside for wave 3 lower. This most likely will not present itself until next week.” The pair did break above 116.24 so favor the upside until 119.34 (we will look for a top and reversal near there next week).

Strategy: Flat (waiting for wave 3 bearish opportunity)

British Pound 2.0270 Potential Reversal Point
Commentary: The structure of Cable is virtually the same as the EUR/USD. That is, in the intermediate term, we expect both pairs to turn lower and head much lower. However, just as the EUR/USD seems poised to test 1.3750, the GBP/USD appears that it will continue towards the 61.8% of 2.0654-1.9651 at 2.0271 before reversing to at least 1.9961. We can not ignore the fact that setbacks since 8/17 have occurred in 3 waves. 3 means indicates countertrend movements, therefore the near term trend is pointed higher. In summary, look for a top and reversal near the 61.8% of 2.0654-1.9651 at 2.0271 with the initial bearish objective at 1.9961.

Strategy: Remain bullish, move risk to 2.0043, (from 1.9961), target 2.0271 and 2.0439 (move to BE after T1 hit)

Swiss Franc Large Triangle is Dominant Pattern
Commentary: With price action remaining choppy on a short term basis, we are showing the daily chart today for perspective. The daily chart shows a clear 5 wave rally from the December 2004 low to the November 2005 high. Everything since has been a correction. However, the correction is not complete. A complex correction has unfolded from the November 2005 high (W-X-Y). Wave X is a triangle, which means that we should expect a terminal thrust lower to complete the correction. The thrust to 1.1815 is most likely just the first leg of wave Y lower. As such, we are looking for price to come under 1.1815 before any meaningful bottom is in place.

Strategy: Flat (best idea here is to sell breaks lower….first bearish pivot at 1.1960)

Canadian Dollar Choppy Range is Risky
Commentary: Near term USD/CAD price action is choppy and corrective as well, which makes trading this pair on a short term basis risky right now. When price action is choppy, we prefer to sit tight and wait for a clearer pattern to emerge. The longer term charts (we are showing the weekly today) indicate that a significant bottom may be in place at 1.0340. A rally above 1.0676 most likely leads to a break above 1.0866. Short term, there is a possible head and shoulders continuation pattern, which is bearish. This pattern would suggest a retest of 1.0340 is in order before a reversal occurs.

Strategy: Flat

Australian Dollar Advancing Correctively
Commentary: The AUD/USD is correcting the .8870-.7673 decline. The 3 wave movements at varrying degrees of trend make this clear. There are a number of possibilities right now, too many to take a strong stand one way or the other. Price could come under .8051 to test the 61.8% of .7673-.8333 in a b wave before proceeding higher in wave c to complete the correction from .7673….or a b wave bottom may already be in place and price could continue higher from above .8051 to complete the c wave. A rally through .8234 favors the latter scenario and a drop under .8051 favors the former.

Strategy: Flat

New Zealand Dollar Short Term Bullish Against .6869
Commentary: Naturally, the Kiwi is in the exact same position as the AUD/USD. Since the NZD/USD already tested the 61.8% of .6639-.7272 at .6881, it seems more likely that a B wave low is already in place at .6869 and that price is headed higher in wave C to test .7500 before a reversal. .7501 is the 100% extension of .6639-.7272/.6869 and .7547 is the 61.8% retracement of .8082-.6639.

Strategy: Remain bullish, against .6869, target .7500

Jamie Saettele is a Technical Currency Analyst for FXCM.