Major Levels Being Breached - Trend Changes at Hand

Published March 2nd, 2007 - 05:18 GMT
 Euro Topped Out
 Japanese Yen Testing Support
 British Pound Finally Breaks
 Swiss Franc Reverses
 Canadian Dollar Entering a 3rd Wave Down
 Australian Dollar .7827 Make or Break
 New Zealand Dollar Declining in a 3rd Wave Down

EURUSD It remains our contention that price has already topped at 1.3262.  The decline below 1.3182 supports a bearish structure at least in the short term.  Ultimately, we look for the decline that began at 1.3262 to test at least 1.2757.  This is where the decline from 1.3262 would equal the 1.3370-1.2865 decline.  The 1.3370-1.2865 decline took 29 days and the 1.2865-1.3262 rally took 33 days.  Given that the decline now underway is the third wave (either a C or a 3), look for this decline to accelerate and reach the cited target in faster than 30 days.  The major long term supporting trendline intersects with the 1.2700 figure at the end of March.                  

USDJPY Price continues to brush up against the confluence of the 200 day SMA, 61.8% of 114.42-122.21, and trendline drawn off of the May 2006 and December 2006 lows.  A break of this support (daily close below) would indicate a major change in trend.  Near term, 117.85 is resistance with a break above exposing 118.89.  Support below the aforementioned trendline is at the 78.6% fibo of 114.42-122.21 at 116.10.     

GBPUSD The longer term wave structure suggests that a major top is in place at 1.9915.  In fact, the rally from 1.8090 traced out an ending diagonal.  Ending diagonals are often fully retraced.  A decline below 1.9260 strongly suggests that a top is in place at 1.9915.  Near term price action is confirming our bearish bias.  Price is currently testing support at a line drawn off of the 1/8 and 3/31 lows.  A daily close below this line may provide the impetus needed for a breakout to the downside.  Short term support is at 1.9402 with a break there shifting focus to the 1/8 low at 1.9260.    

USDCHF The USDCHF is little changed.  The 61.8% of 1.1878-1.2575 at 1.2144 may have marked the low but price needs to rally above the 2/20 low at 1.2312 to more confidently say that at least a near term low is in place.  Still, downside risk is limited.  Daily oscillators are slowly turning higher as well.  Daily CCI is below -100 and an increase in the oscillator to above -100 signals a reversal.       

USDCAD The long term bearish bias remains intact.  The decline off of the top of the 2 year channel combined with the outside monthly reversal favor the downside.  Ultimately the decline from 1.1879 should come under 1.0927 to complete a 5th wave.  The rally from 1.1564 has retraced 61.8% of the 1.1879-1.1564 decline in a 2nd wave.  The next few weeks should see price come under 1.1564 and possibly even 1.1250-1.1326 which marks the 138.2% to 161.8% extensions of 1.1879-1.1564 / 1.1761.  1.1761 is resistance.  A push above, while not expected, targets the 78.6% at 1.1812.    

AUDUSD The AUDUSD has tested the .7827 level that we have focused on in recent days and bounced.  This is the make or break level as far as we are concerned.  A break below gives scope to a more pronounced decline (test of .7698).  Since the decline from the top (.7950) is in just 3 waves, this could simply be a correction which gives way to a 5th wave to above .7950 (see chart below).       

NZDUSD Analysis is unchanged from yesterday Given the long term head and shoulders pattern along with the 78.6% fibo of .7470-.5927 at .7138, it is possible that Kiwi is near a major top.  The best interpretation on the daily accounts for an extended wave 1 from .5927.  As mentioned with the USDJPY, a correction following a 5 wave sequence where the 1st wave is extended tends to bottom near the bottom of the 2nd wave.  Thus, expectations are for a decline to .6528 from near current price.  The 78.6% fibo at .7138 is risk.  The pair looks entrenched in a 3rd wave in the short term that should carry to at least .6878.  Kiwi is currently at .6870 so focus has shifted to the 161.8% extension of .7128-.6970 / .7036 at .6783.

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