Forex Technicals: The Day Ahead, August 21

[DailyFx]

Most USD pairs are expected to make one more price extreme before the big reversal. However, the EURUSD looks like it may have already bottomed.









No change from yesterday. “The drop below 1.4656 (to 1.4630) completed wave v of 5 and the 5 wave drop from 1.6039. The advance from the low is probably just wave i of A in the A-B-C correction that is underway now. The advance that ensues is expected to reach just shy of 1.50 at minimum.” Price ideally remains above 1.4672 and short term support is 1.47.




Short term, 109.23/34 should provide support. This is a Fibo confluence / daily pivot support level. A final c wave rally that ends above 110.64 is then expected to ensue.




Until 1.8786 is broken, the GBPUSD is vulnerable to a new low (below 1.8512). The sideways trading over the past few days takes the form of a triangle. Triangles occur quite often as 4th waves and lead to terminal thrusts in wave 5 - followed by a reversal.




The USDCHF does not want to roll over. As long as price is above 1.0943, then there is potential for a rally in wave iii of 5. Coming below 1.0895 would indicate that a top is probably in place.




We maintain that the drop that ended just below 1.0550 was probably a 4th wave correction. As such, expectations are for a new high (above 1.0726) to complete the advance from .9974. Longer term objectives are at 1.08. Look for a top and reversal near there. Coming under 1.0543 would require a reassessment of the situation.




The AUDUSD is in the same position as the GBPUSD. That is, a triangle appears to be complete as a 4th wave sideways correction. As long as price is below .8795, expectations are for a decline that ends below .8591…then, look for a bottom.




5 waves down are already complete in the NZDUSD and a corrective advance is underway now. Wave A of an A-B-C correction is likely complete at .7159. However, notice that the rally is in 3 waves itself. This means that a flat is probably underway. In a flat, wave B retraces a good deal of wave A (sometimes 100% of wave A). Expect a choppy decline in wave B, perhaps as deep as .6950 or lower over the next few days before a strong wave C rally begins.





Jamie Saettele writes Forex Technicals: The Day Ahead, Monday-Thursday (published at 6 pm EST), Daily Technicals every weekday morning (9 am EST), COT analysis (published Monday mornings), and analysis of currency crosses throughout the week. He is also the author of Sentiment in the Forex Market.



Contact at jsaettele@dailyfx.com