Euro Thrusts from Triangle; Expect Dip into 13200

DailyFX   |  February 8 2012 9:32 EST

A risk off day may (actually) be in the works. Specifically, the EURUSD pattern reveals near term vulnerability into 13165-13200. The larger trend is considered bullish against 13088 (I like buying the dip).

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Morning Notes:

US Indices – The Dow average is at its highest level since May 2008 and the S&P is testing its July high (2011 cash basis high is 1370.58). The Nasdaq meanwhile is at its highest level since December 2000 and daily RSI is above 79. Since the tech bubble burst, daily RSI has been above 79 on only 2 occasions, mid April 14/15, 2010 and November 4-8, 2010. Tops occurred on April 26th (dip, new high, and FLASH CRASH) and 11/9 (drop into 11/17 before additional rally). Given the heightened emotion (excitement) surrounding the Nasdaq’s elevated level, I’ll be following this index more closely. The larger support zone to watch in the coming weeks is 2782-2835.

USDOLLAR (Ticker: USDOLLAR): Remains vulnerable to fresh lows towards the November low at 9665. A drop below 9665 exposes the next level of support, which isn’t until the trendline that extends off of the July and October lows near 9600.

EURUSD – 5 waves up out of the triangle are complete, which leaves the EURUSD vulnerable to at least a corrective decline. 13165-13200 is support and the larger trend is considered bullish towards the mid 13400s as long as price is above 13088 (2/7 low).

Prepared by Jamie Saettele, CMT

GBPUSD – GBPUSD focus is on “the 200 day average at 15940 and 50% retracement of the decline from the 2011 high at 15989. A short term Fibonacci extension also comes in at 15965 (161.8% extension of the 2/6 rally).

AUDUSD – This latest move to a new high is probably a thrust from a triangle. The implications are for a move back to at least 10760. More important support going forward is 10690.

NZDUSD – Has reached 8400. Daily RSI remains extreme (above 7800), which in recent years has preceded significant declines. Short term pattern wise, the latest rally may also be from a triangle so I am on the lookout for a move back to 8285.

USDJPY – “With the potential for intervention, bullish price action piques my interest. The rally from the 2/2 low is an impulse therefore longs are favored. Risk on longs is minimal at 7600 (under 2/1 low).”

--- Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com

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Jamie is the author of Sentiment in the Forex Market.