Euro Correcting Gains
Commentary: The 5 wave rally from 1.3261-1.3437 indicates that the larger trend is up unless 1.3261 is broken. However, a 5 wave decline at a smaller degree suggests that the decline from 1.3437 is just the first leg of a 3 wave correction. What we are looking for is a bounce in small wave b with a decline in small wave c towards 1.3328, which is the 61.8% of 1.3261-1.3437. Again, the larger trend is up (as long as 1.3261 holds).

Strategy: Bullish, against 1.3261, targeting 1.3680

Japanese Yen Stalls Below 124.00
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 yesterday in a 4th wave and the current rally is most likely a 5th wave that will not extend much beyond 123.73 (might already be complete at 123.74). We expect a decline near term to correct the ‘5 up’ from 120.75, so now is not the time to position for a run to 128.00.

Strategy: Move to flat, we’ll look to return to the bull side on a correction of the 5 wave rally from 120.75.

British Pound Bullish Above 1.9780
Commentary: Like the EURUSD, the structure in Cable is bullish but the correction that began at 1.9947 is likely to continue for a little longer. Waves 2 and 4 are often similar as far as time is concerned. Wave 2 took 40 hours to complete and wave 4 has only been in progress for 16 hours. So look for weakness/consolidation for the rest of the New York session before the 5th wave rally begins (which should exceed 1.9947). Support is concentrated between 1.9835/78, which is the 23.6%-38.2% of 1.9655-1.9947. The bias is bullish as long as 1.9780 is intact.

Strategy: Look to align with bulls close to 1.9850, against 1.9780, target 1.9947

Swiss Franc Complex Correction
Commentary: We mentioned that support is at 1.2350 and the USDCHF bounced yesterday at 1.2353 in what is likely wave X in what will be a complex correction of the 1.2145-1.2476 5 wave rally. Near term resistance stretches to 1.2450 (the 78.6% of 1.2476-1.2353). The final leg of the mentioned correction is likely to play out the rest of the week towards the 61.8% of 1.2145-1.2476 (1.2271).

Strategy: Look to get bullish near 1.2271, against 1.2145, targeting a break above 1.2476.

Canadian Dollar 1.0750 Is Key
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 Upcoming C Wave
Commentary: The rally fom last week’s low is impulsive, and strongly indicates that at least one more 5 wave rally is expected with .8332 remaining intact. Near term, a c wave decline seems likely to unfold (see labels above). A possible end for wave c is .8403/20, which is the 50% and 38.2% retracements of .8332-.8474. The previous 4th wave extreme is .8396, which reinforces support.

Strategy: Move to flat

New Zealand Dollar Spikes Above Previous High
Commentary: There is no change from yesterday as Kiwi continues to confuse. “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: None

Jamie Saettele is a Technical Currency Analyst for FXCM.