Trend Table (# indicates trend)
CHARTS
-price bar chart with Key Reversal (magenta)
-base currency 10 yr interest rate in green
-counter currency 10 yr interest rate in red
-interest rate differential in black
-indicator that measures change in interest rate differential and change in price
-dots on charts are highest and lowest readings of indicator in 13 and 52 weeks
Weekly
The Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) reversed from channel resistance last week and bounced off of the same channel’s support this week. As long as the channel is intact, I view the USDOLLAR in a constructive light. RSI on the 300 minute chart reveals a momentum extreme at the 9/22 high. Momentum extremes indicate that the rally to that point is part of a 3rd wave. A new high is therefore expected in a 5th wave. The February high at 10062 is an objective.
Euro / US Dollar
Weekly
“It’s too early to say that a low is in place and it is best to wait until October (new month, new point of reference with respect to time) before taking a strong stand but there are signs that a EURUSD bullish base is forming. Price has broken above short term trendlines and sentiment is extreme (recentEconomist cover, COT positioning, etc.)” The EURUSD is making a run at its lows and time will tell if it holds. If broken, then weakness could extend to the mid January pivot at 13250. Resistance is 13415, 13440, and 13460. Early October action will offer an opening range to trade from (best way to play reversals and extensions in my opinion).
British Pound / US Dollar
Weekly
Cable exceeded 15700 but has reversed and focus shifts slightly lower towards 15475/90, the 61.8% retracement of the rally from 15327 and former pivot. Failure to extend lower and exceeding 15715 would shift focus to 15910, which is where the rally from 15326 would consist of 2 equal legs (from 15530).
Australian Dollar / US Dollar
Weekly
The AUDUSD has broken below its 2008-2010 trendline, and focus remains lower towards bearish objectives from the November 2010 low at 9534 and the 2009-2010 double top at 9400. This larger bearish count is valid against 9985. Resistance is 9700/60 next week.
New Zealand Dollar / US Dollar
Weekly
The NZDUSD has broken its 2009-2010 trendline and focus remains lower. Extended weakness would target a Fibonacci extension at 7555 and a channel from the top, which crosses 7455 next week. 7700/20 is resistance and the extended weakness scenario is favored as long as price is below 7831
US Dollar / Japanese Yen
Weekly
For the first time in months, USDJPY wave structure is clear. In fact, the low volatility environment suggests that a 4th wave is likely unfolding from the August low. 4th waves are usually triangles or flats and notoriously choppy and/or slow. In this case, a triangle is more likely given the current position of the Elliott channel. As such, the USDJPY range may actually tighten before the final break lower in a 5th wave to record lows. A reversal of epic proportions will then be expected. Resistance is 7750.
US Dollar / Canadian Dollar
Weekly
With the USDCAD breaking to fresh highs, focus is higher towards 10675 (July and August 2010 highs). RSI divergence on the 300 minute chart warns of at least sideways action for a bit however. Support is 10357 and an extension into the mentioned 10675 is favored as long as price is above 10255.
US Dollar / Swiss Franc
Weekly
Recent weakness in the USDCHF may be the beginning of a larger decline as the drop can be counted as an impulse. While not the cleanest of impulses (5 waves), the construction is valid. I wrote yesterday that “regardless of the larger trend, a move back to 9020/80 is expected.” The morning high is 9084 and I am not giving up on the larger bullish bias just yet. An RSI positive reversal signal on the 300 minute and price holding above its short term trendline warrant a more bullish view against 8915. Upside objectives are 9300 and 9400.
Euro / Japanese Yen
Weekly
Having broken the 2010 lows, focus is on the trendline that extends off of the 2009 and 2010 lows. The line is below 10100. Favor the downside as long as price is below 10494. Exceeding that level would shift focus to the recent 10700 pivot. Watch the Elliott channel resistance as well.
Euro / British Pound
Weekly
The EURGBP remains between several trendlines (a longer term line that extends off of the 2010 and 2011 lows and a shorter term line that extends off of the highs since July) but today’s drop gives scope to a bearish resolution. A drop below 8528 would shift focus to the channel underway from the July high. Until then, respect the range....
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