Quick Updates on Popular Currency Pairs

09/18/2009 12:01 am EST

Focus: FOREX

Jamie Saettele

Senior Technical Strategist, FXCM

Euro/US Dollar

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The EUR/USD has exceeded the December 2008 high and is approaching 1.4850 (a 100% extension), which is a potential target. The line extended from the March and June highs is also a potential target-that line is at 1.5160 this week and increases about 60 pips a week. RSI is above 70, divergent with the December high (RSI reached 79 then) and former trend line support turned resistance is right at current price. The risk of a bearish reversal is high, but until there are signs of such (candle pattern or short-term wave pattern, for instance), it is dangerous to be short.

British Pound/US Dollar

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On the daily, a potential head-and-shoulders top is evident (although the pattern cannot be confirmed until price breaks below the neckline, which is near 1.6200). Bolstering the bearish bias is the shorter-term head-and-shoulders top (which comprises what may be the larger right shoulder), which is confirmed. Bears are favored against 1.6665.

Australian Dollar/US Dollar

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The AUD/USD continues to work higher towards the 78.6% of the decline from .9856-.6007, which is .9032. This level intersects with a potential resistance line on September 24. Former support at .8951 is also a level to keep in mind. Momentum indicators are divergent (not shown). The message is the same here as for the EUR/USD: The risk of a reversal is high and increases with each tick higher in price.

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New Zealand Dollar/US Dollar

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A NZD/USD objective is .7250. This is where the rally from .6193 would be equal to 61.8% of the .4890-.6601 rally. The level also rests in between two prominent former pivots (.7222 and .7384). Weakness near there would warrant a closer look. Divergence with DDiff (derived from DMI) warns of a reversal.

US Dollar/Japanese Yen

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Keep the long-term outlook in perspective. "A fourth triangle ended in 2007 above 124.00, therefore, the decline from that level is viewed as a fifth wave that will not be considered complete until price drops to an all-time low (below the 1995 low near 80)." At this point, former support in the 91.73/94 zone is potential resistance.

US Dollar/Canadian Dollar

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Barring a break above the resistance line, the USD/CAD is vulnerable to a drop towards 1.0330, which has been both support and resistance over the last several years. This level is also the 61.8% extension of the 1.3068-1.0782 decline (from 1.1730).

US Dollar/Swiss Franc

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"The print below 1.0367 (December 2008 low) satisfies the minimum requirement for wave v of C." An objective is 1.0037 (100% extension). Trading above channel resistance would indicate with a high probability that a low is in place.

By Jamie Saettele of DailyFX.com

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