Forex Technicals: The Day Ahead, September 25

[DailyFx]

Underlying sentiment along with technical considerations favor dollar strength from here. Risk is clearly defined.









It is wise to abandon the bullish bias at this point. What I thought was a 4th wave is taking far too long. Although price has yet to slip below the parallel Elliott channel, it should soon. A reason to at least turn neutral at this point is the overwhelming agreement that the ‘bailout’ from Paulson and co. is bad for the US dollar. One headline of many appeared the day of the recent top (Sep. 22). Such uniform thinking is rarely correct. From a technical standpoint, the rally from 1.4150 is close to equal with the rally from 1.3877-1.4546. Equality among waves is typical of corrective behavior. Price should remain below 1.4745 if indeed a larger EURUSD is underway.




I am not confident at all in the USDJPY bearish bias against 106.90. Bears may have their day as long as price is below the short term trendline but the technical picture lacks clarity at this point. Also favoring USDJPY upside is the recent spike in volatility. Spikes in volatility usually mark USDJPY bottoms, at least for a few weeks anyway.




Cable is in the same position as the EURUSD. The count is the same as is its position relative to the parallel Elliott channel. If the pair has rolled over, then price should remain below 1.8612.




The USDCHF decline from 1.1422 is in 3 waves and possibly the first wave of a triangle of flat. In either case, the ensuing advance should retrace a good portion of the decline. The 61.8% of the decline is at 1.1135.




The USDCAD bounce from 1.03 may be a small 4th wave within the impulsive drop from 1.0827. Tracing out this 4th and then a 5th wave would confirm my longer term bearish stance. Expect resistance near 1.05 (38.2% Fibo is at 1.0493 and former 4th wave is at 1.0519). Price should remain below 1.0493.




The AUDUSD B wave is underway towards the Fibonacci zone (.8247-.8076). There is a count (not shown), that treats the top at .524 as the end of an expanded flat. Both counts warrant positioning for a decline now, against .8524.




A B wave correction is probably also underway in the NZDUSD. The 3 wave rally from .6435 could be wave A of either a flat or triangle. In both cases, a large portion of the advance from .6435 would be retraced.





Jamie Saettele writes Forex Technicals: The Day Ahead, Monday-Thursday (published 6-7 pm EST), Daily Technicals every weekday morning (9-10 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 him at jsaettele@dailyfx.com