Daily Technical Report: Major Currencies

Bulls meet initial support close to the psychological 1.0000 level.

USD/CAD bulls are reversing higher from that all-important 1.0000 level (psychological level and prior trading range).

Positive momentum needs to push above 1.0400 to extend the recovery higher above the old resistance level at 1.0673 (August high & Congestion zone).

A strong directional confirmation above here will open a much larger recovery into 1.0850 plus. This would extend the upside breakout from the rate’s ending triangle pattern, which was part of a major Elliott Wave cycle.

Meanwhile, only a sustained close beneath 1.0100 will extend bearish setbacks into next the support level at 0.9750.

Elsewhere, EUR/CAD is extending above its 200-day MA, within a large multi-month trading range. Key resistance continues to hold at 1.4379 (June swing high), which has for some time marked a strong distribution pattern.

CHF/CAD is retesting its support nearby the 200-day MA at 1.1227, following the dramatic price slide lower (triggered by the SNB intervention). The cross-rate has now retraced more than half of its 2011 gains.

AUD/USD

Remains beneath 200-day MA at 1.0384.

AUD/USD’s bullish recovery has reversed beneath the long-term 200-day MA which is currently holding at 1.0385. Expect this area to cap further into the rate’s psychological level at 1.0000.

In terms of the big picture, AUD/USD’s multi-year uptrend remains under pressure since the previous breakdown. The bears need to confirm beneath 0.9388 (04th Oct low & structural level) to unlock a much larger decline into 0.9220 and 0.9144 (38.2% Fib-2008 uptrend).

Elsewhere, the Aussie dollar remains stable against the New Zealand dollar. The pair is still locked within its new bear cycle structure while it holds beneath its 200-day MA. Key support can be found at 1.2320 and 1.2100.

The Aussie dollar is also weakening against the Japanese yen, after failing into resistance at 79.92. Watch for a resumption of the major downtrend from spring 2011. Strong downside scope will signal further unwinding of global risk appetite.

GBP/JPY

Re-test of 122.65 favoured by structure present since 116.84.

GBP/JPY saw a minor break under 120.34 which failed to hold, reaching 120.00. This is suggestive of the potential for a further recovery leg higher to test the region near 123.00.

The structure present since 116.84 is deemed corrective, with scope for a final swing higher to complete this corrective phase. However a sustained push under yesterday’s low at 120.00 will warn of resumption of weakness back towards the floor near 117.00. However, an eventual return to 116.84/98 is expected, below which would open up an extension towards 115.00 immediately.

A sustained break over 123.31 is required to change the current bearish bias. Should this take place a larger corrective phase higher would then be anticipated.

EUR/JPY

Returns to test the 104.96/99 floor.

EUR/JPY continues to hold over the 104.96/99 floor, following initial support. Provided this floor is not breached, scope is seen for a fresh swing higher to re-test the 107.68 level. However, the larger structure present since 114.18 favours the formation of a lower high close to 108.03, for a return to re-test 100.76.

Failure to hold under 108.03 will warn of a larger recovery structure, negating our medium-term bearish bias. Also, if a push over 108.03 can be sustained this will bring into focus a potential false break lower out of a falling channel in the daily timeframe.

Under the annual low would open up an extension to 97.50, ahead of 92.80, levels not seen since 2000.

Please see the attached chart below.