Dollar Bearish Patterns Playing Out

[DailyFx]

The EURUSD and GBPUSD held their short term support lines, indicating that the US dollar likely heads lower from current levels.









Risk for bulls can be moved up to 1.4150. Repeating what I wrote last night…”There are a number of various wave counts at the current juncture, which makes trading more risky than normal. The rally from the low (1.3877) in 3 waves to this point. However, the rally from 1.4071 has not yet reached the point where it would equal the rally from 1.3877 (which would be at 1.4689) and the rally from 1.3877 has yet to even reach the 38.2% of the decline from 1.6040 (which would be at 1.4667). Therefore, we favor the count that treats the rally from 1.4071 as just the first leg in a larger C wave (or 3rd wave). This count is valid as long as price is above 1.4071. Potential support is at 1.4251 (and watch the potential short term trendline as well). Finally, it is also possible that the rally from 1.3877 is the first leg of a more complex correction (flat or a triangle). Subjectively, I favor strength with price remaining above 1.4071, but not before a dip into the 1.4250 area.” The strong rally off of the short term support line favors the bullish count.




Wow. The USDJPY flew through 106.74, negating the bearish bias that we had held. Still, our focus remains on the longer term picture and the advance from 95.72, which is corrective (3 waves). Resistance may be strong at the current level (108), which is the September 12 high.




Risk for bulls can be moved up to 1.7911. Cable has rallied from its short term support line as well. Favor additional strength from current price. A push into the former congestion zone of 1.8510-1.88 is likely next week.




The USDCHF is not nearly as clear as the EURUSD or GBPUSD. The pair pushed through its 9/15 high and failed to hold below its short term trendline, making it a distinct possibility that the trend is still up. We would need a drop below 1.09 for us to return to a confident bearish bias.




There is no change to the USDCAD analysis. We are bearish against 1.0806 as the down-up sequence since 1.0827 is impulsive to the downside (5 waves) and corrective to the upside (3 waves). We expect a break below 1.0566 soon and much lower prices going forward. The USDCAD should remain below 1.0731.




The AUDUSD recovery is underway as we had suspected. Expect a return to .8750/.88 (we can’t be sure about how long it would take since we do not know what kind of corrective pattern would unfold). Bulls may face some resistance in the .8270-.8360 zone (former reaction highs). Near term support is at .8170.




Risk for NZDUSD bulls can be moved up to .6680. To repeat what I have said over the past week…”A countertrend move back to the .7200 area or higher is probably underway. This level intersects with the underside of a former support line that was broken in August.”





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