News Column

EURUSD Reverses in Largest Range Since November Low

May 9, 2014

Jamie Saettele, CMT

  • EURUSD 3 year cycle tops
  • NZDUSD resolves disastrous trading conditions with a spike and reversal?
  • USDCAD at channel support





    --Tradingideas are availabletoJ.S. Trade Desk members.



    EUR/USD

    Weekly

    EURUSD Reverses in Largest Range Since November Low

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    -"The weak momentum profile is not suggestive of a strong bull." Weekly momentum is just as telling. The most recent top is accompanied by RSI divergence with RSI < 60. This is exceptionally bearish. A similar RSI pattern occurred in July 2008. If the rate does trade to a new high, then a drop back into the range would be required in order to create a tradable high (complete an ending diagonal from 1.3294...highlighted). It's worth mentioning that important tops have formed in April/May in recent years. A 1.3750 break would 'announce' that a downtrend has commenced."



    -EURUSD made a new high and the sharp reversal supports the ending diagonal (wedge) interpretation. Diagonals are often fully retraced (sometimes quickly), which yields a target of 1.3294. This week's developments may finally put to rest the idea that the EURUSD has broken the line that extends off of the 2008 and 2011 highs. Rather, a failed breakout and top would keep with the pattern of 3 year cycle tops. 1.3750 is an important reference point (year open). 1.3840 is important to the integrity of the reversal.



    GBP/USD

    Weekly

    EURUSD Reverses in Largest Range Since November Low

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    -GBPUSD upside pressures remain intact. The line that extends off of the November and February lows pinpointed the 3/24 low and a break of the support line would suggest that February's outside month was exhaustive.



    -The market continues to trade around the November 2009 high. The 2009 high/2005 low rests at 1.7042. The high at this point is just above the August 5, 2009 close (high day for the entire move off of the 2009 low). The latest pivot low is 1.6820. A drop below would break the near term bull trend.



    AUD/USD

    Weekly

    EURUSD Reverses in Largest Range Since November Low

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    -"The rate dropped into the April low / trendline before reversing sharply. The action suggests that a recovery could materialize. I'll look higher towards .9330/60 as long as price is above .9200. Consider that the breakdown level."



    -AUDUSD followed through on last week's reversal, keeping the larger bull move intact. A new high could complete a zigzag (Elliott pattern) from the January low although resistance is seen at .9412/23 as well.



    NZD/USD

    Weekly

    EURUSD Reverses in Largest Range Since November Low

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    -"Don't forget about the line that extends off of the 1996 and 2007 highs. That line crosses through the 2008, 2011, and highs as well. In 2011 (record free float high), the rate surged through the line in late July before topping on August 1st."



    -After trading primarily between .8500 and .8700 for the last 6 weeks, NZDUSD topped right at the mentioned line from 1996. The top also came in just above the August 1, 2011 close (that was the day of the free float record). The weekly key reversal bolsters the idea that NZDUSD is topping.



    USD/JPY

    Weekly

    EURUSD Reverses in Largest Range Since November Low

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    -"USDJPY has bounced from the line that extends off of the February and 3/14 lows. The rally from the February low channels in a corrective manner and makes 104.12 important from a bigger picture bearish perspective."



    -"There is an Elliott case to be made for a return to the 4thwave of one less degree. The range spans 93.78 to 96.55. Of course, the path to get to that level is far from clear. Resistance extends into 103.05/25." USDJPY spiked into 103 on Friday (failing to reach the Fibo level at 103.05). The market remains within a range but the important level from a bigger picture bearish perspective can be lowered to the NFP high.



    USD/CAD

    Weekly

    EURUSD Reverses in Largest Range Since November Low

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    -Measured objectives from the breakout above the 2011 high range from 1.1680 to 1.1910. The Jul 2009 high rests in this zone at 1.1724 and the 2007 high is near the top of the zone at 1.1875.



    -From an Elliott perspective, it's possible that the rally from the 2012 low composes a '3rd of a 3rd (or C)' wave from the 2007 low.



    -Action since the January high may compose a complex correction (triple zigzag in this case). Above 1.1000 would bolster long term prospects.



    USD/CHF

    Weekly

    EURUSD Reverses in Largest Range Since November Low

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    -The same momentum considerations that apply to EURUSD apply to USDCHF (the March price low occurred with RSI above 30). Weekly RSI has been unable to register an 'oversold' reading despite the market declining for almost 2 years.



    -"Patter wise, the decline from the 2012 high 'fits' well as a 3 wave correction with wave C as an ending diagonal. When (if) this market turns is up in the air." Did we get our answer? USDCHF is above the line that extends off of the July 2013 and January 2014 highs. Exceeding .8952 would trigger the first break of pivot high with left and right strength of 4 since the break above the March high last May.




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    Source: DailyFx