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By Jamie Saettele, Sr. Technical Strategist ?and? Joel Kruger, Technical Strategist Fri Oct 29 20:43:00 GMT 2010 
EURO / US DOLLAR
BRITISH POUND / US DOLLAR Jamie: The GBPUSD remains range bound. The specter of the recent double top with RSI divergence brings to the forefront the potential for a test of 15294 in the coming weeks. Trading above 16110 would shift focus to the trendline (triangle line?), which is at 16340 next week. Joel: Rallies have been very well capped above psychological barriers at 1.6000 and the market has since stalled out and reversed course in favor of some consolidation. We retain a mild bearish bias at current levels and ultimately, only a close back above 1.6000 would negate outlook and give reason for pause. Setbacks have stalled out for now by the 50-Day SMA, and a close below the medium-term SMA should open the next down-leg towards 1.5300. Any intraday rallies should be well capped ahead of 1.6000. 
AUSTRALIAN DOLLAR / US DOLLAR Jamie: I favor additional weakness in a more complex correction (a double 3) towards the Elliott channel support line to complete wave 4 within the 5 wave advance from the May low. Near term resistance is 9890. Joel: The market looks to have finally stalled out after reaching critical psychological barriers by parity. A bearish reversal week following 9 consecutive weekly positive closes gave us early warning signals for the onset of a major correction, and despite the surge above 0.9900 a few days back, we remained encouraged by the reversal prospects and continued to look to fade the rallies. Indeed the market stalled out ahead of the recently set post float record highs by parity, and from here, we look for a break back below 0.9650 to strengthen bearish outlook and accelerate declines. Any intraday rallies should be well capped ahead of 0.9850. 
NEW ZEALAND DOLLAR / US DOLLAR Jamie: A NZDUSD objective remains 7840, which is where the rally from 6945 would equal the rally from 6557 to 7402. Potential resistance before 7650 is 7600. I wrote yesterday that “the recent decline is clearly corrective and daily RSI has held 50, so 7650 is in danger.” Near term support is at 7600. Joel: As per our commentary in previous days, gains have indeed stalled out above 0.7600 with the market reversing sharply to close back below the 10 and 20-Day SMAs. At this point, we look for a major medium-term top by 0.7645, in favor of additional declines over the coming days and weeks back towards the yearly lows by 0.6560. Next key support comes in by 0.7405, with any intraday rallies expected to be well capped below 0.7550 on a close basis. The 10-Day SMA has just crossed below the 20-Day SMA (bearish cross) for the first time since early September to further confirm bias. 
US DOLLAR / JAPANESE YEN Jamie: Maybe the proximity of the all-time USDJPY low is just too much for the pair to resist. I wrote yesterday that “the rally from the low is in 5 waves which strongly favors additional upside. A deep second wave correction may be nearing completion at an important level (has been support and resistance the last few weeks). There is also the specter of an inverse head and shoulders reversal pattern (right shoulder forming now).” The drop below 8080 negates the previously bullish evidence and makes the decline from 8200 an impulse now. 8110 is resistance. Joel: While we like the idea of the market establishing a major base by current levels over the medium and longer-term, short-term price action has still not confirmed any signs of a bottom, with the price action over the past few days more characteristic of a bearish consolidation ahead of the next drop towards the record lows. Ultimately, a close back above 82.00 will now be required to relieve downside pressures. However, we will be on the lookout for an opportunity to buy on dips below 79.75. 
US DOLLAR / CANADIAN DOLLAR Jamie: “There are 5 waves higher from 9975 and 3 waves lower from 10380. 5 waves denote the direction of the larger trend so look higher. An initial objective is the 100% extension at 10560.” A drop below 10150 would not negate the bullish outlook, only delay it. 10120 would then be support. Joel: As expected, the market was very well supported on dips below parity, with the latest sharp bounce back above 1.0200 solidifying our constructive outlook and opening the door for significant gains over the coming weeks. Look for continued appreciation towards the multi-week highs by 1.0700 over the coming weeks, with only a break back below 0.9970 to ultimately negate outlook and give reason for concern. A higher low is now sought out in the 1.0100’s ahead of the next major upside extension to be confirmed on a break back above key short-term resistance at 1.0375. 
US DOLLAR / SWISS FRANC Jamie: A major low might be in place at 9460 (remember that 9460 was a 100% extension on long term charts). The structure of the rally is not clear but a well defined channel has taken shape and a Fibonacci confluence is at 10050 (probable resistance). Watch the channel for support as well as 9765 (Fibonacci). Joel: With daily studies finally crossing up from oversold and the market managing to close back above the 20-Day SMA for the first time since August, we are encouraged with the prospects for the formation of a major base by the recently established record lows at 0.9460. From here, look for any intraday setbacks to be well supported on dips towards 0.9700, with the market now eying a move towards next key resistance by 1.0000 over the coming sessions. Last week’s inability to extend declines to yet another record low below 0.9460, set up a strong bullish reversal week to end a sequence of 9 consecutive weekly lower highs. This further strengthens our constructive outlook and over the medium and longer-term we see significant upside risk. The market is now looking to establish back above the 50-Day SMA for the first time since mid-June. 
EURO / JAPANESE YEN Jamie: The EURJPY slipped below 11145, which leaves the rally from the low (10541) in 3 waves (and probably wave A of a large corrective pattern). Expectations over the next several weeks and probably month + are for sideways / downside action. 10960 is initial support, followed by 10540. Keep in mind that if a flat is underway, then the entire decline will be retraced in wave B. Joel: The market has done a very good job of holding above the daily Ichimoku cloud to suggest that we could be on the verge of a material shift in the structure in favor of significant upside over the medium and longer-term. Daily studies are however in the process of unwinding from stretched levels, so the preferred strategy is to look to buy into dips rather than on upside breaks. A good level to look to establish a long position now comes in by previous resistance turned support in the form of the daily Ichimoku cloud top (currently by 110.00). 
BRITISH POUND / JAPANESE YEN Jamie: Despite this week’s reversal, the GBPJPY may work lower still in wave B of a triangle or flat. To review, the drop from 16315 is clearly not an impulse but neither is the rally from 11880. A triangle or flat may be underway here from the January 2009 low. In either case, an initial objective is probably 15500 (the monthly key reversal bolsters this bullish outlook).” The reason to question the immediate upside potential is the EURJPY 3 wave rally and the inability of the USDJPY to sustain any sort of rally for more than a few days. 130 is potential resistance early next week. Joel: A closer look at Ichimoku studies suggests that we are still very much in downtrend, with the market most recently breaking to fresh 2010 lows by 126.45. However, as mentioned in previous commentary, daily studies were looking quite stretched, and despite the break to fresh yearly lows, the latest sharp bounce suggests that overall, the market is very well supported in the 126.00’s on a medium-term basis. From here, we would not at all be surprised to see additional upside towards 135.00, but we prefer to remain sidelined given what is still an overwhelmingly bearish trend. 
EURO / BRITISH POUND Jamie: The EURGBP has plunged from its recent high and a look at the weekly warns that the high may not be exceeded for a while. Price reversed not only at the 100% extension level but also at a long term resistance line. This week will end as a key reversal and bearish engulfing pattern. Intraday oscillators are divergent with the new low which warns of a move back to 8775. Joel: The latest impressive multi-week rally could finally be at an end, with the market stalling out perfectly by some major falling trend-line resistance off of the record highs from 2008 and reversing sharply to put in a bearish week. From here the risks are for additional declines over the medium-term with sights set on a move to fresh yearly lows by critical psychological barriers at 0.8000. Ultimately, only back above 0.9000 would negate and give reason for concern. 
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