• Home ::
• Technical ::
• Analysis Reports

• Send
• Print
• Add To
• Rss

Picking Tops and Bottoms

This report has been deactivated

Euro Rally Likely Before Next Collapse

Thu, Aug 28 2008, 05:48 GMT
by Jamie Saettele

DailyFX

The recent collapse in the EURUSD is probably the beginning of a larger decline that could reach 1.35 in the next few months. Still, markets do not move in a straight line. Rather, they zigzag, and a sizeable bounce is probably underway now that will correct the extreme bearish sentiment that currently exists.

The recent collapse in the EURUSD is probably the beginning of a larger decline that could reach 1.35 in the next few months.
Coming under the 200 day SMA indicates a long term change in trend and the momentum extreme with RSI also suggests additional losses. Momentum extremes occur at the beginning or middle of a trend, not the end (this is why there is divergence at the end of a trend, when rate of change is weaker). Still, markets do not move in a straight line. Rather, they zigzag, and a bounce is probably underway now that will correct the extreme bearish sentiment that currently exists.

The rally from 1.4630 and decline from 1.4908 were both in 3 waves. 2 legs that both consist of 3 waves only happen as part of flats or triangles. If a triangle, then price will remain below 1.4908 but still move higher from current price. If a flat, then price will exceed 1.4908 and test the 1.4980-1.5080 congestion zone before turning lower in larger wave C. We favor the flat in order to relieve the market of excess Euro shorts.

Published on  Thu, Aug 28 2008, 05:48 GMT

AUDUSD Bearish Triangle Opportunity

Wed, Aug 20 2008, 08:16 GMT
by Jamie Saettele

DailyFX

The AUDUSD has traded sideways the past few sessions in what has taken the form of a triangle. Expectations are for a bearish break from this consolidation.

The sideways trading that has taken place for the last few days is most likely a 4th wave triangle within the 5 wave drop from .9849. A drop below .8591 would satisfy minimum expectations. The January low at .8512 is potential support.

This is a close up of the triangle. There is a slight chance that price exceeds .8757 in wave c of a flat. That count still calls for a drop below .8590 though.

Published on  Wed, Aug 20 2008, 08:16 GMT

GBPUSD Possibilites After Fed Release

Wed, Aug 6 2008, 06:15 GMT
by Jamie Saettele

DailyFX

If the GBPUSD spikes lower following the Fed release, then look for support near 1.9470. This would present a bullish opportunity against 1.9364.

If the GBPUSD spikes lower following the Fed release, then look for support near 1.9470 (this is the 6/17 low and should be defended by triangle support.). Expectations are for wave E of the triangle to unfold and end near 1.9850/1.99 before the longer term decline resumes.

Published on  Wed, Aug 6 2008, 06:15 GMT

USDCAD: Preparing for a Breakout

Fri, Jul 25 2008, 06:38 GMT
by Jamie Saettele

DailyFX

Published on  Fri, Jul 25 2008, 06:38 GMT

EURUSD: Don't Be Spooked by Volatility

Fri, Jul 18 2008, 06:04 GMT
by Jamie Saettele

DailyFX

The drop from the top (1.6039) has traders talking of a major reversal. The EURUSD could be at the beginning of a larger bear move (with price eventually coming under 1.5283) but there is not enough evidence to suggest, with a high degree of confidence, that a top is in place.

There is no change to the bigger picture labeling. In fact, the spike above 1.60 inspires confidence in the larger bullish bias. We know exactly where we are wrong on this count. 1.5611 must hold for the wave IV triangle interpretation (more on that below) to remain valid.

Our triangle labeling has wave IV complete at 1.5468 but the advance since then is a series of 1st and 2nd waves. As long as price is above 1.5611, we maintain that wave iii of 3 of V is underway towards an objective at 1.6325. In summary, remain bullish as long as price is above 1.5611. We know exactly where we are wrong. In such as case, we’ll look to flip and trade from the short side for the first time in a while. Potential support is at 1.5775 and 1.57.

Published on  Fri, Jul 18 2008, 06:04 GMT

EURUSD: Rally to Accelerate and Break 1.60

Thu, Jul 10 2008, 05:57 GMT
by Jamie Saettele

DailyFX

The EURUSD is expected to exceed 1.6018 and continue on to all-time highs and beyond in the next few weeks. The chart above shows the count from the 1.1640 low. A push through 1.6018 is required in order to complete 5 waves. Wave IV is complete as a triangle (see next chart).

This is a revised short term count (the count in the technicals is slightly different). The EURUSD is expected to accelerate higher in a 3rd wave from 1.5611 (although price should remain well above there). Long term targets are near 1.64 and 1.70 (see the Quarterly Report for details). The 161.8% extension of 1.5468-1.5909/1.5612 is at 1.6325; this isa possible target.

Published on  Thu, Jul 10 2008, 05:57 GMT

EURUSD: Short Term Bearish Potential

Wed, Jul 2 2008, 11:20 GMT
by Jamie Saettele

DailyFX

We’re up 300 pips on the GBPAUD trade. Risk should be moved to breakeven (2.0585). Bullish potential remains significant. There is currently a bearish opportunity in the EURUSD.

The EURUSD is expected to exceed 1.6018 and continue on to all-time highs in the next few weeks BUT a triangle may be unfolding in which case the advance from 1.5303 would be wave D and wave E would be underway now. E waves of triangles are usually sharp and deep; so it is probable that the decline would continue until 1.53/1.54. Given the proximity of the point where the triangle would be violated, reward to risk is heavily skewed in favor of bears for the next few days.

Most legs within triangles form zigzags. Wave D (if it is a D wave) is a completed zigzag. Wave c of the zigzag subdivides into 5 waves as it should, which instills confidence in placing risk just above 1.5843. As mentioned, E waves are sharp so we should know if we are correct in our assessment right away.

Published on  Wed, Jul 2 2008, 11:20 GMT

Trading the GBPAUD Reversal

Fri, Jun 20 2008, 08:29 GMT
by Jamie Saettele

DailyFX

Visit GBPAUD Reversal Reversal to see longer term charts of the GPBAUD. The rally from 2.0295 (11 year low) is in 5 waves, confirming that the trend has turned to the upside. A correction is unfolding now that should end near 2.0538 (Fibo and former congestion). It will probably take at least a week for this correction to play out.

Published on  Fri, Jun 20 2008, 08:29 GMT

British Pound Still Bullish Above 1.9461

Wed, Jun 11 2008, 06:14 GMT
by Jamie Saettele

DailyFX

The GBPUSD's decline today is most likely a wave 2 correction. Expectations are for a wave 3 advance to begin soon. The minimum objective is 1.9850 but 2.0190 is likely. This bullish setup is valid as long as price is above 1.9460.

The decline from 2.1160 was in 5 waves (not labeled) and is wave A in a large 3 wave correction. Since then, wave B of the correction has been unfolding. This B wave is taking the form of either a triangle or flat. In the case of a triangle (red labels), price will exceed 1.9850 and probably test 2.02. In the case of a flat, price will exceed 2.04 before reversing lower.

The 15 minute chart shows that the rally from 1.9461 was in 5 waves, therefore a bullish bias is warranted against that level. The decline can be counted as a 3 wave correction. The correction is deep, as 2nd waves often are. Second waves are deep in order to convince the majority of market participants that the trend is back down. This sets the stage for the strong rally that occurs in wave 3.

Published on  Wed, Jun 11 2008, 06:14 GMT

Dollar / Yen Tops Out Near 106

Fri, Jun 6 2008, 11:34 GMT
by Jamie Saettele

DailyFX

The USDJPY spike through 105.86 satisfies minimum expectations for the corrective rally that began at 95.72. The downtrend should be back underway.

It is important to keep the longer term charts (such as monthly and weekly) in your mind for perspective. Our analysis of the USDJPY monthly chart indicates to us that a drop below 81 is still probable. A picture perfect 5 wave decline appears to be unfolding from the 1971 high in the USDJPY. Wave 3 of the decline was extended and divides perfectly into 5 waves itself. Wave 2 was a sharp zigzag correction and wave 4 a triangle (a-b-c-d-e); which satisfies the guideline of alternation (if wave 2 is sharp, then wave 4 should be shallow and vice versa). If this pattern is correct, then wave 5 is underway now and would not be considered complete until the USDJPY drops below 81.12.

The advance from the 95.72 low is corrective (a complex correction to be specific). The rally consists of overlapping 3 wave structures that are connected by X waves. The result is a triple combination correction; labeled W-X-Y-X-Z. The spike through 105.70 satisfies minimum expectations for wave Z. Even shorter term, the USDJPY pattern indicates that a top is in place, so a bearish bias is warranted against 105.86.

Published on  Fri, Jun 6 2008, 11:34 GMT

British Pound Strength to Continue

Fri, May 30 2008, 06:05 GMT
by Jamie Saettele

DailyFX

This is an updated chart from the one that we showed last Wednesday. The break through the trendline should lead to a continuation of strength. “A complex correction (W-X-Y) is unfolding since the 1/22 low at 1.9337. Support is clearly strong above 1.9350, which led to a triple bottom. The final leg of the correction is underway now and should lead to a thrust above 2.04 by mid-July.”

Short term, support held just below 1.97 and a 4th wave should be complete at 1.9672. The corrective sequence took the form of a double flat (complex and labeled W-X-Y). Complex forms such as this are common in 4th waves. Risk is at 1.9671 and the target is above 1.9850 (at minimum).

Published on  Fri, May 30 2008, 06:05 GMT

British Pound Breakout Opportunity

Thu, May 22 2008, 12:12 GMT
by Jamie Saettele

DailyFX

A complex correction (W-X-Y) is unfolding since the 1/22 low at 1.9337. Support is clearly strong above 1.9350, which led to a triple bottom. The final leg of the correction is underway now and should lead to a thrust above 2.04 by mid-July. Near term, the pair is sitting at a resistance line but a break through would shift focus to 2.00.

Very short term, the rally from 1.9362 could be a series of 1st and 2nd waves. Support is strong at today’s low (former resistance from multiple daily highs served as support). Risk is tight at 1.9612 and upside potential is 4 x risk.

Published on  Thu, May 22 2008, 12:12 GMT

Euro / Pound Correction Resumes

Fri, May 16 2008, 09:58 GMT
by Jamie Saettele

DailyFX

This is the count that we have working with for some time. Clearly, the dominant trend has been up since January 2007 but that does not mean that we can’t play the short side from time to time. We view the rally from .6679 as wave 3 within the 5 wave advance from .6535 (January 2007 low). A large wave 4 correction is underway now. The first two legs of that correction are complete and the third leg will bring price below .7766. Measured support is at .7656, just before a large congestion zone.

The hourly chart zooms in on price action since the wave 3 top at .8097. Corrections unfold as 3 wave structures (A-B-C). Wave A was down to .7766 and wave B ended right at the confluence of the 61.8% of .8097-.7766 / where c = a within B. The confluence of these measurements (along with psychological resistance at .80) makes the case for a bearish bias against the figure.

Published on  Fri, May 16 2008, 09:58 GMT

Canadian Dollar and Euro / Yen Trade Ideas

Thu, May 8 2008, 05:59 GMT
by Jamie Saettele

DailyFX

This week, confidence is high in 2 setups, so we are presenting both of them.

We remain bulls due to the 5 wave advance from .9710 to 1.0324. The USDCAD looks poised to test the 61.8% at .9944. A drop to this level should lead to a bottom and advance that eventually breaks above 1.0324.

We have focused on the EURJPY in recent special reports because the reward to risk on this trade is extremely favorable. A large C wave is underway from 164.97. A first wave down is complete at 160.59 and the short term pattern strongly suggests that wave ii is complete at 163.09. If our assessment of the short term picture is correct, then the EURJPY should drop quickly from near current levels.

Published on  Thu, May 8 2008, 05:59 GMT

Euro / Yen Sets Up For Bears...Again

Thu, May 1 2008, 05:50 GMT
by Jamie Saettele

DailyFX

We exited last Wednesday’s EURJPY short at 161.15 (exit point was published at DailyFX+ on Tuesday). We wish to re-enter the trade now. View the Original Report.

This is an updated daily chart. The resistance line that dates to October AND the other side of what was once a support line (which dates back to 2000) was evidence to us last Wednesday that a wave 2 top was either in place or very close to in place. As it turned out, the high was last Wednesday. Remember, the count tells us that a 3rd of C is expected. In other words, the EURJPY should fall hard. The ultimate target is not until below 149.25, but probably closer to 140.

Near term, small degree 1st and 2nd waves are complete at 163.87. The down-up sequence since then is most likely waves i and ii of 3. A short term trendline supports a bearish bias below 163.

Published on  Thu, May 1 2008, 05:50 GMT

Euro / Yen Secondary Top?

Thu, Apr 24 2008, 06:08 GMT
by Jamie Saettele

DailyFX

The USDCAD long entry (presented last Wednesday) was missed by 12 pips. If you follow the Technicals though, then you are probably on track with the USDCAD. We have been following the EURJPY very closely, which is this week’s idea.

In the EURJPY, a wave 2 top might be in place at today’s high. The EURJPY touched a resistance line that dates to October AND the other side of what was once a support line (which dates back to 2000). The count tells us that a 3rd of C is expected or possibly underway now. Remember, this point in wave structure is usually a vertical type of move. In other words, the EURJPY should fall off a cliff in the next few weeks. The target is not until below 149.25, but probably closer to 140. This bearish count remains intact as long as price is below 167.73.

This is a very short term chart (5 min), but it does confirm our longer term bias. There 5 waves down from 164.97, which supports a bearish bias. As long as price remains below 165, the immediate bearish bias is intact. As mentioned though in the previous chart, 167.73 is the bearish ‘line in the sand’. If the stop is hit, then we’ll try again closer to 167.73. This is a short term idea that could turn into a longer term idea, which is why the target is TBD (to be determined).

Published on  Thu, Apr 24 2008, 06:08 GMT

Canadian Dollar Setting Up for Bears (USDCAD Bulls)

Thu, Apr 17 2008, 06:45 GMT
by Jamie Saettele

DailyFX

A major multi-year low could be in place at .9055. The decline from the 2002 high at 1.6189 is in 7 waves and counts perfectly as a double zigzag, labeled W-X-Y. One reason that we propose the major low scenario is because the strength and form of the rally from .9055 is indicative of a major turn. The 13 day rate of change (not shown) from .9055 to 1.0248 was the highest that it had been in years. Momentum extremes such as this ‘announce’ major trend shifts when the move occurs from a significant high or low.

The latest bull leg (.9710-1.0324) is a wave 1 impulse within a 5 wave bull cycle (wave i of 1 is a diagonal). We previously treated the “drop to 1.0018 as wave 2” therefore thinking that wave 3 is underway now. But with price appearing as though it will break below 1.0018, a wave 2 low will probably come in near .9945/67 (61.8% of .9710-1.0324 and 100% extension of 1.0324-1.0018/1.0273).

Published on  Thu, Apr 17 2008, 06:45 GMT

Euro / Yen Decline Will Continue Soon

Thu, Apr 10 2008, 06:12 GMT
by Jamie Saettele

DailyFX

Do not be fooled by the EURJPY rally back to 160. The larger trend is down, as evidenced by wave structure and the break of a 7+ year trendline. The decline should continue soon.

The NZDUSD has broken through a resisting trendline (drawn off of the 3/14 and 3/26 highs), therefore we are exiting the NZDUSD short (from .8049) and the AUDNZD (from 1.1221)

The weekly chart of the EURJPY shows that a 5 wave bull cycle from the October 2000 low at 88.94 ended in July 2007 at 168.94. Since July, a 3 wave correction has been underway. Waves A and B of that correction are complete and wave C is underway from the October 2007 high of 167.73. Wave C is expected to eventually enter the area of the former 4th wave (which coincides with the Fibonacci zone) that extends from 124.16-141.58. Also, in January, a 7+ year supporting trendline was broken; which supports the assertion that 168.98 is a major top.

Zooming in on the daily, we are treating the decline from 167.73 (top of wave B) to 151.71 as wave 1 of C. This decline has taken the form of a leading diagonal (waves i and iv overlap and wave i through v each consist of 3 waves). The sharp rise from 151.71 is considered wave 2. Second waves usually reverse near the former 4th wave and/or the 61.8% of wave 1. These levels are 161.40 and 161.55. The high yesterday was 161.71. While this is reason to suspect that 161.71 is the wave 2 high, a closer look reveals that the EURJPY will probably spike through 162 before plummeting in wave 3 of C.

In Elliott, form is most important. It is form that has us suspecting that larger wave 2 is not yet complete. Wave 2 has taken the form of a zigzag (a-b-c). Wave c would equal wave a at 162.67. More important though is that wave 5 of c is unfolding as an ending diagonal and one more high is required (above 161.71) in order for the pattern to be considered complete. 162.67 (waves a and c of the diagonal are equal) and 164.30 (78.6% of 167.73-151.71) are potential reversal points. Due to the larger bearish pattern remaining intact as long as price is below 167.73 and that this top may not form until next week, we will publish our specific entry at a later date at FXCMTR.

Published on  Thu, Apr 10 2008, 06:12 GMT

EURUSD: Opportunity to Short

Fri, Apr 4 2008, 10:58 GMT
by Jamie Saettele

DailyFX

Open trades right now are long AUDNZD from 1.1221 and short NZDUSD from .8049. The stop on AUDNZD can be moved to 1.1329 and the stop on NZDUSD can be moved to .8106. Targets on both have not been determined. Now, we see a high reward / low risk opportunity to sell the EURUSD.

Our best longer term count treats the decline from 1.5904 as wave 4 (within the 5 wave advance from 1.2865) of III (within the 5 wave advance from 1.1638). Typically, 4th waves retrace about 38.2% of wave 3 of the same degree; that would place the EURUSD near 1.4894. Another common occurrence is for price to come back to the center of the triangle that the break occurred from. That places the EURUSD near 1.4650 (very close to the 50% at 1.4582). The near term picture confirms our long term count. 5 waves down are complete and a 3 wave correction is complete at 1.5701. Risk is at 1.5701. As long as the EURUSD is below this level, price accelerating lower remains a possibility.

Published on  Fri, Apr 4 2008, 10:58 GMT

New Zealand Dollar: Decline to Accelerate

Thu, Mar 20 2008, 06:17 GMT
by Jamie Saettele

DailyFX

Visit the Kiwi MAJOR Reversal article from Friday to view the longer term chart that indicates why we favor a major turn. This chart is very short term (15 minute) for timing purposes.

This is a possible short term bearish count that would fit with our bigger picture count that suggests a major top is in place at .8215. The decline from .8215 can be counted as a 5 wave drop (wave i is a leading diagonal) and the rally to .8173 can be counted as a 3 wave correction. This up-down sequence is viewed as waves 1 and 2 of a 5 wave bear cycle. This implies that wave 3 is underway now (from .8173) and that the decline is about to accelerate. Expect a small bounce in wave ii of 3 first though.

Published on  Thu, Mar 20 2008, 06:17 GMT

Euro Near the End of Corrective Rally Against Yen

Thu, Mar 13 2008, 06:03 GMT
by Jamie Saettele

DailyFX

We exited the GBPUSD long from yesterday at 2.0248 for a 188 pip profit. Currently, we see a bearish setup in EURJPY. A spike through 159.20 should lead to a reversal. The next bear leg is expected to eventually break below the August 2007 low of 149.25.

The drop from 167.64 can be viewed as a series of 1st and 2nd waves (following a major truncated 5th wave). Therefore, the EURJPY is entering a 3rd of a 3rd wave decline; often the fastest part of the decline. The larger bearish bias is intact as long as price is below 161.40.

Near term, a spike through 159.20 is likely; in order to complete wave c of ii. A likely reversal point is the 61.8% of 161.40-155.93 at 159.31. The 78.6% at 160.23 could also provide resistance.

Published on  Thu, Mar 13 2008, 06:03 GMT

British Pound on the Brink of a Bullish Break

Wed, Mar 5 2008, 06:17 GMT
by Jamie Saettele

DailyFX

The GBPUSD is on the verge of a bullish breakout that could test 2.07. Risk is tight

The decline from 2.1160 to 1.9337 is in 5 waves and indicates that the larger trend is down. That drop is either wave 1 or A within a bear cycle. The rally from 1.9337 is either wave 2 or B but it is our contention that the rally is not over. Wave C (from 1.9361) has exceeded the wave A high of 1.9957 but the weight of evidence argues for the rally to continue.

This is a close up view of the rally from 1.9361 (wave C within the A-B-C rally from 1.9337). Wave i of C is 3446 pips and wave iii of C is 355 pips. Since waves i and iii are roughly equal, neither one can be considered extended. In an impulse, one of waves i, iii, or v will be extended. Typically, a 5th wave extension travels 161.8% of the wave i to iii price distance. This would place the GBPUSD at 2.0796, very close to the 78.6% of 2.1160-1.9937 at 2.0770. Potential reversal areas prior to the 2.0770/2.0800 zone are 2.0187/2.0248 and 2.0420/2.0463. The GBPUSD is on the verge of breaking out from a 4th wave triangle. Risk is tight at just below 1.9761.

Yet another reason to favor a major rally is COT positioning. The COT indexes have turned higher from 0 (bearish sentiment extremes). A simple look at the chart and indicators below the chart show that turns from 0 precede major bullish moves. For more on COT and how we interpret the information, visit the Weekly COT Report .

Published on  Wed, Mar 5 2008, 06:17 GMT

Play a Dollar Recovery against the Yen

Thu, Feb 28 2008, 06:04 GMT
by Jamie Saettele

DailyFX

Exit the USDCAD short that we entered last Wednesday for a 300+ pip gain. Although we expect price to come under .9755, the low this morning is close enough at .9759. The new idea is to play a USD recovery against the Yen. The USDJPY has held above 106, which is round number support and a reaction low from earlier in the month.

The entire rally from 104.97 to 108.59 could have completed a larger correction but we subjectively favor a larger rally because of various sentiment measures. A large complex correction may be unfolding with the drop from 108.59 as wave X in a W-X-Y. If this is the case, then price should put in a bottom soon and begin a rally that reaches roughly 110. Be sure to visit the Elliott Wave forum for trading ideas and updates to this pattern.

Published on  Thu, Feb 28 2008, 06:04 GMT

Canadian Dollar Reversal Trade

Fri, Feb 22 2008, 05:56 GMT
by Jamie Saettele

DailyFX

The USDCAD Pattern that we presented on Friday appears to have resolved itself; a high probability opportunity should be taken advantage of.

The decline from 1.0378 is clearly a 5 wave decline, which indicates additonal bearish potential. We had originally thought that an a-b-c corrective advance was complete at 1.0128. As it turned out though, that rally was wave W in a larger complex correction. Wave X and Y complete the correction. Wave Y would equal wave W at 1.0211. Be sure to visit the Elliott Wave forum for trading ideas and updates to this pattern.

It is possible that a top is in at 1.0197, but not a certainty (there are no certainties in trading). This is why risk should be kept above 1.0378. Even if the USDCAD does exceed 1.0197, the strength is likely to prove marginal and temporary.

Published on  Fri, Feb 22 2008, 05:56 GMT

Risk is Small for Euro Bulls

Thu, Feb 14 2008, 05:56 GMT
by Jamie Saettele

DailyFX

We remain long AUDNZD from 1.1221 (Dec. 13 entry) and long GPBUSD from 1.9421 (Feb. 6 entry). We now wish to enter a long EURUSD position.

A triangle as a 4th wave may be complete at the 2/7 low of 1.4438. Expectations are for a bullish breakout that in the coming weeks that completes wave 5 within the 5 wave advance from 1.3261. Wave E of the triangle has taken the form of a zigzag. As long as price is above 1.4438, maintain a bullish stance. It looks as if the EURUSD could explode higher any moment now, given that the rally from 1.4438 may be a series of 1st and 2nd waves -- a common pattern that occurs before a big move.

Certain psychology attends different waves. This is an excerpt from the Elliott Wave Principle, Prechter and Frost’s classic on EW theory and application.

"E waves in triangles appear to most market observers to be the dramatic kickoff of a new downtrend after a top has been built...intensifies bearish conviction of market participants at precisely the time that they should be preparing for a substantial move in the opposite direction. Thus, E waves, being ending waves, are attended by a psychology as emotional as that of fifth waves"

This sounds like the current environment from a psychological standpoint.

Risk for bulls at this point is small. The most bullish count would treat the rally from 1.4438 as a series of 1st and 2nd waves 1-2-i of 3-ii of 3. This count remains intact as long as price is above 1.4431 but there are other bullish counts that are valid as long as price is above 1.4479. As such, risk should be kept to just below 1.4479.

Published on  Thu, Feb 14 2008, 05:56 GMT

British Pound: Bullish Short Term Pattern

Thu, Feb 7 2008, 06:24 GMT
by Jamie Saettele

DailyFX

The pattern that we think is unfolidng indicates that the GBPUSD could test 1.9800 as early as this week. Reinforcing this idea is from a Fibonacci level this morning's low at 1.9552.

The rally from 1.9337 to 1.9957 is a 5 wave advance and is probably wave A within the A-B-C corrective rally. Wave B is underway now and is probably at its midpoint. The drop from 1.9957 is in 5 waves, therefore, expect a rally in wave b of B that challenges at least structural resistance at 1.9787 over the next few days before a decline in wave c of B completes wave B.

Realize that this is a VERY dangerous trade given the BOE rate announcement tommorow.

Published on  Thu, Feb 7 2008, 06:24 GMT

British Pound: Possible Top in Place at 1.9950

Thu, Jan 31 2008, 06:42 GMT
by Jamie Saettele

DailyFX

Don't expect the quiet conditions of the last few days to last much longer as an interest rate announcement from the FOMC takes place later today. Emotional impulses generated from the herding mentality that exists in free markets is what creates recognizable price patterns. Price action; before, during, and after big events such as the one later today often results in extremely clear patterns because emotion surrounding the market is elevated. The pattern in the GBPUSD is clear and presents an opportunity for short term traders.

We are treating the decline from 2.1160 as wave A or 1 in a 3 or 5 wave bear cycle. The rally underway now is either wave B or 2. This countertrend rally should eventually challenge 2.0100 and maybe 2.0463 (61.8%). However, countertrend rallies unfold in 3 waves (A-B-C) and wave A is probably complete (we will show why on the next chart). We focus on the GBPUSD in the Elliott Wave forum so be sure to visit us for more ideas.

As mentioned, a top for wave A might be in place at 1.9949. Wave 5 of A appears to take the form of a diagonal (overlapping waves) and diagonals are usually fully retraced. In this case, the origin of the diagonal is close to the 38.2% of 1.9337-1.9949 at 1.9715. The next move is towards this level.

Published on  Thu, Jan 31 2008, 06:42 GMT

USDCAD: Rally Fails at 200 day SMA

Thu, Jan 24 2008, 06:22 GMT
by Jamie Saettele

DailyFX

The rally from .9755 is in 5 waves and is either wave C of an A-B-C rally from .9055 or is just wave 1 of either a larger C or 3. Given that the rally from .9755 is in 5 waves, weakness is expected to at least 1.0124 (1/15 low) -- which is defended by the 38.2% of .9755-1.0378 at 1.0140. We’ll look for an opportunity to get long near this support. Resistance from the 200 day SMA is not shown but is at 1.0337.

Very short term, the USDCAD is in the early stages of what is probably a second wave from 1.0337. Second waves can be deep so this corrective decline could drop towards 1.0000 or lower. But, support is likely strong near the confluence of the 38.2% at 1.0140 and where wave C would equal wave A within the A-B-C decline from 1.0378 at 1.0143.

Published on  Thu, Jan 24 2008, 06:22 GMT

GBPUSD: Watch for an Explosion Higher

Thu, Jan 17 2008, 06:04 GMT
by Jamie Saettele

DailyFX

The GBPUSD has fallen over 1,500 pips in the last few months. No market moves in a straight line, so is it time for a sizeable Cable rally? We think that sentiment indicators along with the patterns on the chart indicate yes...and we know exactly when we would be wrong.

Given the shelf of support just below 1.9500 (multiple extensions and a support line), we think it possible that at least a multi-week bottom is in place at 1.9483. As such, a bullish bias is warranted against 1.9524 for a rally to at least the 2.0100 level (former resistance). We do not know yet of course whether or not the decline from 2.1160 will complete 5 waves -- so far the decline is in just 3 waves.

On this very short term chart, we see what is either waves A and B or 1 and 2 of either a 3 wave advance (A-B-C) or a 5 wave (1-2-3-4-5) advance. What we have labeled i and then ii is labeled as such because the rally from 1.9527 is an impulse but has yet to exceed the previous high. This means that the trend is up for at least a rally through 1.9720. As we mentioned though, we expect a rally to test former resistance near 2.0100.

Be sure to visit the Elliott wave forum for more trade ideas.

The % of total commercial positions that are long measured through a 52 week percentile is at 96 and the % of total speculative positions that are long measured through a 52 week percentile is at 0. Cable is at a bearish sentiment extreme and an important bottom should form now (we think it has already formed). Notice on the chart that the COT indicators are lined up now just as they always are at important lows.

Understanding sentiment is extremely important in trading - visit the Trader Sentiment and Positioning section of the DailyFX forum.

Published on  Thu, Jan 17 2008, 06:04 GMT

NZDJPY: Setting Up For a Major Decline

Thu, Jan 10 2008, 06:48 GMT
by Jamie Saettele

DailyFX

Yen strength and equity weakness have been the dominant themes so far in 2008. The Dow broke its November 2007 low yesterday and the August 2007 low is less than 100 points away. If that level (12,518 to be exact) gives way, then the Dow could fall apart. In the FX market, the same can be said for the Yen crosses; especially NZDJPY. If you want to play Dow weakness through the FX market, then take a look at NZDJPY. The patterns indicate that a historic decline may be just around the corner.

This is one count that we are tracking in NZDJPY. The decline from 97.74 to 74.25 is considered wave A within a large A-B-C correction from 97.74. A triangle may be in its final stages as wave B now. Fibonacci measurements suggest that resistance should be strong in the 85.40-.86.20 zone. The bias remains bearish as long as price is below 88.21. The pattern could be a bullish triangle, but given the patterns visible in the separate legs of the cross (NZDUSD and USDJPY), we favor the bearish triangle scenario.

This is another count on the daily, which is also bearish. The initial decline is still wave A but the rally from 74.25 to 91.42 would be wave B. Wave 1 of C is from 91.42 to 80.31(an argument can be made that the decline is in 5 waves…it is sloppy but 1st waves often lack clarity). Wave 2 of C is from 80.31 to 89.10 (this rally is clearly in 3 waves). Wave 3 of C is underway now, indicating that the decline is likely to accelerate. Similar to the triangle count above, risk is above 88.21. The objective for this decline is where wave C would equal wave A; at 67.94.

Discuss Elliott wave counts on NZDJPY or any other pair at the DailyFX Elliott wave forum

CURRENT AND FORMER TRADES

Published on  Thu, Jan 10 2008, 06:48 GMT

EURUSD: Buying the Dip

Wed, Jan 2 2008, 06:08 GMT
by Jamie Saettele

DailyFX

Published on  Wed, Jan 2 2008, 06:08 GMT

EURUSD: Bottoming Now or Closer to 1.40?

Thu, Dec 20 2007, 06:06 GMT
by Jamie Saettele

DailyFX

In a December 10th special report, we argued that “the EURUSD correction from 1.4966 is not over. In fact, it has probably just passed its midpoint in terms of time.” We wrote that the corrective pattern should resolve itself by December 18th; when “the time of wave iv is equivalent to the time of wave ii.” It is now December 19th. So, is the correction over?

As we have written for some time now in the daily technicals and the Elliott wave forum, the current decline is most likely just a 4th wave correction within the 5 wave bull cycle that began at 1.3261. The pair has reached potential Fibonacci support at 1.4353 (38.2% of 1.3360-1.4967), so a bottom and reversal at the current juncture is possible. Possible but is it probable? The line at the top of wave i (1.3816) is risk for those willing to get bullish.

This chart zooms in on the bull cycle from 1.3261. Price is nearing the 100% extension of 1.4967-1.4526/1.4750 at 1.4309. This is where wave c of 4 = wave a of 4; this is a common relationship. However, wave v of 3 was extended and extended fifth waves are often fully retraced. In this case, a full retracement of wave v would mean a return to the 1.4015 area, which is just below the 161.8% extension of 1.4967-1.4526/1.4750 at 1.4036. This level is defended by the 61.8% of 1.3360-1.4967 at 1.3974.

The chart above is of the EURUSD weekly chart and indicators that are derived from COT data. The top red line measures the commercial hedger bullishness. The second red line measures speculator bullishness. The blue line is a combination of speculative and commercial hedger positioning. Strong buy signals occur when the top red line is near 100, the second red line near 0, and the blue line near 0. This indicates that commercial demand is strong and that speculative demand is weak. At market turns, speculators are always wrong and commercial hedgers always correct. Notice that EURUSD market lows occur when the top red line peaks, the second red line bottoms and the blue line bottoms.

Summary

The EURUSD either bottoms now or near 1.4015. The important thing to understand is that the wave structure and COT data indicate that a bottom is forming and that the next big move (big is relative but in this case big is at least 500 pips) is up, not down. Risk for bulls is the July high at 1.3852. As always, we will keep an eye on the short term pattern and publish our comments everyday at daily technicals and FXCMTR.

Published on  Thu, Dec 20 2007, 06:06 GMT

CADJPY: Consolidating Before Thrusting Much Higher

Thu, Dec 13 2007, 06:37 GMT
by Jamie Saettele

DailyFX

The CADJPY, and all JPY pairs for that matter, have been extremely volatile lately. With volatility comes opportunity though and we have identified a short term pattern in the CADJPY that is likely to lead to a strong upward thrust, but not before some consolidation.

Published on  Thu, Dec 13 2007, 06:37 GMT

USDJPY: Pattern Argues for Rally to 113.75

Thu, Dec 6 2007, 06:28 GMT
by Jamie Saettele

DailyFX

The pattern that has unfolded in the USDJPY since the low on November 26th at 107.20 indicates that significant upside potential remains, but not before a deeper setback.  The wave pattern is quite clear at the current juncture and presents a favorable reward/risk ratio for bulls.

Published on  Thu, Dec 6 2007, 06:28 GMT

USDCAD: Could It Break Above 1.0000 Already?

Thu, Nov 22 2007, 07:02 GMT
by Jamie Saettele

DailyFX

Published on  Thu, Nov 22 2007, 07:02 GMT

EURAUD: Still Short Term Upside Potential

Mon, Nov 19 2007, 06:31 GMT
by Jamie Saettele

DailyFX

Published on  Mon, Nov 19 2007, 06:31 GMT

GBPCHF: Big Rally Expected

Fri, Nov 9 2007, 06:30 GMT
by Jamie Saettele

DailyFX

Published on  Fri, Nov 9 2007, 06:30 GMT

USDJPY: Preparing for the Plunge

Thu, Nov 1 2007, 07:50 GMT
by Jamie Saettele

DailyFX

Published on  Thu, Nov 1 2007, 07:50 GMT

EURGBP: Adding to Long Trade

Thu, Oct 25 2007, 05:48 GMT
by Jamie Saettele

DailyFX

We are long the EURGBP from .6938 (since 10/10).   The pair looks more bullish now than it did then so we would like to add to the position.   Noticethat the .6893-.7007 advance is in 5 waves and that the decline is in 3(and ended right at the 61.8% of .6893-.7007) at .6937.   The next rally should end well beyond .7007.   Move the stop for both lots to .6932.

Published on  Thu, Oct 25 2007, 05:48 GMT

NZD/JPY: Rallying to Complete a Correction

Thu, Oct 18 2007, 09:29 GMT
by Jamie Saettele

DailyFX

Published on  Thu, Oct 18 2007, 09:29 GMT

EUR/GBP: Continuation Trade

Thu, Oct 11 2007, 07:47 GMT
by Jamie Saettele

DailyFX

EURGBP Current Value: 0.6934
10/10/2007 4:32 PM

Buy Now
Stop: .6899
Target: TBD (likely just above .7027)

We went short the AUDUSD yesterday at .8985. Keep the stop at .9045. If price drops below .8912, then move to breakeven. Today’s focus in on the EURGBP. For more on the EURGBP, see the Breakout article from a few weeks ago.

We view the decline from .7019 as wave 4 within the 5 wave bull cycle from .6679. Therefore, wave 5 is underway to above .7027.

Pending Trades

Date Trade

October 3 USDJPY Short @ 118.00 (stop: 124.20, Target: TBD)

Open Trades

Date Trade

September 19 AUDCAD Long @ .8670 (stop: .8605, Target: 1.0530)

October 9 AUDUSD Short @ .8985 (stop: .9045…move to BE below .8910, Target: TBD)

October 10 EURGBP Long @ .6938 (stop: .6899, Target: TBD)

Closed/Cancelled Trades

Date Trade

May 2 EURCHF Short @ 1.6435 CANCELLED

May 7 EURAUD Short @ 1.6507 PROFIT on 1 LOT at 1.6274 (+233 AUD pips)

April 30 EURGBP Short @ .6803 STOPPED BREAKEVEN

May 7 EURAUD Short @ 1.6507 PROFIT on 1 LOT at 1.6259(+248 AUD pips)

May 14 AUDUSD Short @ .8328 STOPPED at .8337 (-18 USD pips)

May 9 USDCHF Long @ 1.2160 PROFIT on 1 LOT at 1.2249 (+ 90 CHF pips)

May 16 GBPJPY Short @ 238.71 STOPPED at 239.46 (- 150 JPY pips)

May 9 USDCHF Long @ 1.2158 PROFIT on 1 LOT at 1.2259 (+ 101 CHF pips)

May 21 EURAUD Short @ 1.6495 CANCELLED

May 23 AUDUSD Short @ .8236 PROFIT at .8206 (+ 58 USD pips)

May 30 USDCAD Long @ 1.0732 STOPPED at 1.0684 (-90 CAD pips)

May 29 AUDUSD Long @ .8216 PROFIT on 1 LOT at .8308 (+ 92 USD pips)

May 29 AUDUSD Long @ .8216 PROFIT on 1 LOT at .8390 (+ 174 USD pips)

June 5 GBPJPY Short @ 242.04 PROFIT on 1 LOT at 241.20 (+ 82 JPY pips)

June 5 GBPJPY Short @ 242.04 PROFIT on 1 LOT at 241.29 (+ 73 JPY pips)

June 6 EURUSD Long @ 1.3505 STOPPED at 1.3449 (-112 USD pips)

June 11 EURJPY Short @ 163.13 CANCELLED

June 13 GBPUSD Long ½ @ 1.9733 STOPPED at 1.9675 (-58 USD pips)

June 8 USDCAD Long @ 1.0616 STOPPED at 1.0616 (Breakeven)

June 12 NZDUSD Short @ .7519 and .7565 STOPPED at .7642 (-200 USD pips)

June 18 EURGBP Long @ .6752 STOPPED at .6727(-50 GBP pips)

June 21 EURJPY Short @ 165.65 STOPPED at 166.05 (-82 JPY pips)

June 22 EURAUD Long ½ @ 1.5858 PROFIT on 1 LOT at 1.5950 (+ 92 AUD pips)

June 27 EURUSD Long @ 1.3458 PROFIT on 1 LOT at 1.3629 (+ 171 USD pips)

June 27 EURUSD Long @ 1.3458 PROFIT on 1 LOT at 1.3635 (+ 177 USD pips)

June 28 GBPCHF Short @ 2.4656 PROFIT at 2.4491 (+ 330 CHF pips)

July 2 USDCAD Long @1.0551 STOPPED BREAKEVEN

July 5 USDJPY Long @122.90 STOPPED BREAKEVEN

July 16 GBPJPY Short @ 248.13 STOPPED at 248.75 (- 62 JPY pips)

July 17 AUDUSD Long @ .8736 PROFIT on 1 LOT at .8762 (+ 26 USD pips)

July 17 AUDUSD Long @ .8736 PROFIT on 1 LOT at .8830 (+ 94 USD pips)

July 9 EURCHF Short @ 1.6578 STOPPED at 1.6680 (- 204 CHF pips)

July 23 GBPUSD Short @ 2.0585 PROFIT at 2.0506 (+79 USD pips)

July 25 AUDJPY Long @ 106.24 STOPPED at 1.6680 (- 99 JPY pips)

July 26 EURUSD Short @ 1.3789 CANCELLED

July 31 EURUSD Long @ 1.3694 PROFIT at 1.3730 (+72 USD pips)

August 7 GBPJPY Long 1/2 position STOPPED at 238.79 (-175 JPY Pips)

August 9 GBPJPY Short @ 241.90 CANCELLED

August 6 EURGBP Long @ .6795 TOOK LOSS at .6740 (-68 GBP pips)

August 13 EURJPY Short 1/2 position @ 163.15 CANCELLED

August 1 USDCAD Long 1/2 position @ 1.0570 PROFIT at 1.0766 (+192 CAD pips)

August 1 USDCAD Long 1/2 position @ 1.0710 PROFIT at 1.0766 (+58 CAD pips)

August 16 GBPUSD Long 1/2 position @ 1.9831 STOPPED at 1.9765 (-66 USD pips)

August 21 GBPUSD Long @ 1.9811 PROFIT on 1 LOT at 2.0020 (+209 USD pips)

August 21 GBPUSD Long @ 1.9811 PROFIT on 1 LOT at 2.0140 (+329 USD pips)

August 22 USDCHF Short @ 1.2062 and 1.1985 CLOSED at 1.2017 (+ 12 CHF pips)

August 28 EURUSD Short @ 1.3604 STOPPED at 1.3695 (-182 USD pips)

August 29 AUDUSD Long @ .8209 STOPPED at .8119 (-90 USD pips)

September 5 EURAUD Long @ 1.6602 STOPPED BREAKEVEN

September 12 GBPUSD Short @ 2.0320 PROFIT on 1 LOT at 2.0070 (+250 USD pips)

September 12 GBPUSD Short @ 2.0320 PROFIT on 1 LOT at 1.9994 (+326 USD pips)

September 10 GBPCHF Short @ 2.4120 PROFIT on 1 LOT at 2.3554 (+566 CHF pips)

September 20 GBPJPY Long @ 230.03 STOPPED at 230.40 (+37 JPY pips)

September 25 USDJPY Long @ 113.60 CANCELLED

September 26 GBPUSD Long @ 2.0160 PROFIT on 1 LOT at 2.0260 (+100 USD pips)

September 27 EURUSD Short @ 1.4166 STOPPED at 1.4205 (-39 USD pips)

October 2 NZDJPY Short @ 87.93 CLOSED at 88.07 (-14 JPY pips)

October 8 GBPUSD Long @ 2.0353 STOPPED at 2.0298 (-55 USD pips)

Published on  Thu, Oct 11 2007, 07:47 GMT

Japanese Yen: How to Trade It

Thu, Oct 4 2007, 07:45 GMT
by Jamie Saettele

DailyFX

The Yen crosses have rallied significantly from their August lows. In this report, we have provided 9 detailed charts, including one for each of the 7 Yen crosses and the Dow. Some pairs are likely going to break their July high while some are likely to reverse at key Fibonacci levels that we have identified.

The monthly pivot resistance zones are calculated using the prior month’s high, low and close. These are projected resistance levels.

We have favored for months now a larger rally to more fully correct the 124.13-111.59 decline. With the USDJPY trading at the top of its range, the pair may be about to break higher in wave C to complete the correction from 111.59. Measured objectives for the end of the correction are where wave C would equal wave A at 118.12 and the 61.8% of the entire decline at 119.34 (reinforced by the former 4th wave at 119.84). Given that this is our preferred outlook, we would not be surprised to see the other Yen crosses continue substantially higher (some will likely test/exceed the former highs). The best trade in our mind is a short at 118.00, against 124.20, target below 111.59 (probably close to 100.00).

This is an alternate count for the USDJPY. This count has a triangle unfolding from the low. The structure is still overall bearish as we would expect a thrust below 111.59 but price must remain below 117.12 for this count to remain valid. Under this scenario, the Yen crosses would all turn down now.

Historically, October is a bad months for stocks as are years ending in the Number 7 (Decennial pattern). The chart of the Dow shows why we favor the count that has the USDJPY (and other Yen crosses) rallying first and then reversing. The decline from the July high (14021.38) is clearly a 3 wave correction and the rally since is unfolding as an impulse. A setback is possible near term in a small wave 4 before a rally to a new high to complete 5 waves from the August low (12518.51). A measured objective for the end of the rally is a Fibonacci extension at 14427.66. A rally to this level may resolve in a crash. In summary, we are looking for a rally to be followed by a top and reversal of significant proportion over the next few weeks (same as the JPY crosses).

All of the crosses are simply an extension of the USDJPY. Under the preferred interpretation, the EURJPY continues higher and likely tests the high made in July at 168.94 in what is likely wave B of an expanded flat before formation of a double top and reversal that leads to a decline below 149.25. Be sure to check the EURJPY analysis every Monday under the DAILY, currency crosses section of dailyfx.com.

Under the preferred interpretation, the GBPJPY continues higher and likely tests the 61.8% of 251.10-219.30 at 238.95 or the 78.6% at 244.29 before a top and reversal that leads to a decline below 219.30. Given the triangle in wave B of the A-B-C from 219.30, it is clear that the rally is corrective and that the GBPJPY will eventually come under 219.30. Given the outlook for a roughly 200 pip rally in the USDJPY from current price, it seems most likely that the GBPJPY reversal will occur near the center of the Fibo zone (241/242). Be sure to check the GBPJPY analysis every Thursday under the DAILY, currency crosses section of dailyfx.com.

Under the preferred interpretation, the CHFJPY chops higher and rests the 78.6% of 99.77-92.15 before a top and reversal that leads to a decline below 92.15. Given the triangle in wave B of the A-B-C from 219.30, it is clear that the rally is corrective and that the CHFJPY will eventually come under 92.15. Be sure to check the CHFJPY analysis every Tuesday under the DAILY, currency crosses section of dailyfx.com.

The rally from 103.38 is unfolding as an impulse in a large wave 5 to complete a larger rally. Under this interpretation, the pair is likely to exceed 118.20 and test the upper level of monthly pivot resistance near 119.00 prior to a top and reversal. Be sure to check the CADJPY analysis every Tuesday under the DAILY, currency crosses section of dailyfx.com.

The rally from 85.95 is unfolding as an impulse in a large wave 5 to complete a larger rally. Under this interpretation, the pair is likely to exceed 107.70 and test the upper level of monthly pivot resistance near 109.00 prior to a top and reversal. Based on where the rally is in its structure, there is a good chance that the advance from here is choppy. Be sure to check the AUDJPY analysis every Wednesday under the DAILY, currency crosses section of dailyfx.com.

The rally from 76.93 is either a 3rd wave in a 5 wave impulse or wave c and the end of the correction. The pair has stalled at the 61.8% retracement of the former decline. Given the outlook for the Yen in general, a setback at this point is possible but a reversal and drop below 74.25 from current levels does not seem likely. The next level of resistance is the 7/31 high at 92.34 and then the 78.6% extension at 92.71. Be sure to check the NZDJPY analysis every Tuesday under the DAILY, currency crosses section of dailyfx.com.

Published on  Thu, Oct 4 2007, 07:45 GMT

GBP/USD: Short Term Bullish Setup

Thu, Sep 27 2007, 09:17 GMT
by Jamie Saettele

DailyFX

The trendline from June of 2006 continues to support the GBPUSD and both our preffered an alternate wave counts are near term bullish.  The reward to risk ratio on this trade is at least 2:1 but we plan on trailing the stop with this trade.  As always, updates are published daily on current and new trades at DailyFX+.  We began publishing this report in May and the trades have generated a net profit of 2,465 pips (not including the AUDCAD open trade) so far.    

Published on  Thu, Sep 27 2007, 09:17 GMT

EUR/AUD: Corrective Decline is a Bullish Sign

Thu, Sep 6 2007, 08:28 GMT
by Jamie Saettele

DailyFX

Published on  Thu, Sep 6 2007, 08:28 GMT

AUDUSD: Short Term Bullish Opportunity

Thu, Aug 30 2007, 08:30 GMT
by Jamie Saettele

DailyFX

Published on  Thu, Aug 30 2007, 08:30 GMT

AUD/USD − Potentially Major Support at .8162

Fri, Aug 17 2007, 09:51 GMT
by Jamie Saettele

DailyFX

The AUDUSD has plummeted from the July 25 high of .8870. The pair is nearing critical support at .8162. Price action near this level will alert us to the most probable path going forward. We cite specific levels that confirm/damage the bullish case.

Published on  Fri, Aug 17 2007, 09:51 GMT

USD/CAD − Setting Up Perfectly for Bulls

Thu, Aug 2 2007, 10:45 GMT
by Jamie Saettele

DailyFX

The USDCAD has come into the Fibonacci support zone that we cited in the daily technicals and in yesterday's USDCAD special report. A break above 1.0700 indicates that wave 3 up is underway towards 1.1100.

Published on  Thu, Aug 2 2007, 10:45 GMT