The correction of USD is shallow but may be complete in the EURUSD at 1.4185. Strength above there would expose 1.4300. The GBPJPY has broken below a support line and resistance is in the 161.00/50 zone.
Euro / US Dollar
The short term pattern confirms the bigger picture bearish view proposed yesterday. The decline from 1.4452 is in 5 waves and 5 wave moves occur in the direction of the larger trend. A correction; back to at least 1.4223 and possibly 1.4300 will present an opportunity to sell the EURUSD with a stop above 1.4452. That correction could be unfolding as a flat, which could lead to a spike below 1.4100 in wave B before wave C exceeds 1.4185. Be cognizant of this if attempting to sell a break of yesterday’s low. Bottom line though is that the larger EURUSD trend has turned turn and rallies should be sold. With this in mind, the rally from 1.4185, although shallow, did reach the minimum target zone of the area of the previous 4th wave. Aggressive bears may wish to sell against 1.4185.
British Pound / US Dollar
The GBPUSD break above 1.6750 was from a triangle and thrusts from triangles are terminal (meaning that they complete larger degree moves). The next chart support is 1.6340. Near term, the decline from the top is most likely a first wave. A second wave correction is expected upon completion of the initial bear leg from above 1.7000. The trade here comes on selling the second wave bounce.
Australian Dollar / US Dollar
The AUDUSD has broken above its June high, confirming that wave C (as well as the entire rally from the October low) is in its final stages. We have yet to see the degree of weakness from the top that is evident in the EURUSD and GBPUSD but RSI divergence as well as the patterns in the EURUSD and GBPUSD do warn of a reversal.
New Zealand Dollar / US Dollar
The NZDUSD is in the same position as the AUDUSD. The break to a 2009 high indicates that wave v of C is underway and possibly complete. Although anticipating a reversal, there is no evidence of one yet. Potential resistance is at .6958. A drop below .6467 would suggest that a top is in place.
US Dollar / Japanese Yen
The USDJPY has failed to accelerate lower, thus it is more likely that the decline from 101.50 is corrective, just as the rally from 87.10 is corrective. In other words, everything from the 2009 low is a correction and will eventually be retraced, but not before a push above 101.50. The USDJPY is nearing potential support from Fibonacci at 96.10.
US Dollar / Canadian Dollar
The entire rally from 1.0782 has now been retraced. However, the drop below 1.0782 may be wave Y in a complex W-X-Y corrective decline from 1.3068. Daily RSI has turned up from oversold (which was also divergent with the low). The USDCAD rally has picked up steam and cleared initial resistance at 1.0940. The advance has the characteristics of an impulse. Hourly RSI is at an extreme right now (price above 1.1000), indicating that a small 3rd wave is probably near completion. Expect short term consolidation in a small 4th wave followed by a push to yet higher levels before any meaningful correction lower takes place. 1.1120-1.1230 is potential resistance.
US Dollar / Swiss Franc
The USDCHF pattern is the same as the EURUSD pattern (but as the inverse). Wave C within the A-B-C corrective decline from 1.2303 may be truncated and therefore complete. Trading above 1.0939 would confirm the reversal.
British Pound / Japanese Yen
I wrote of a “potential support from a shorter term line drawn off of the July 13 and 29 lows at 158.45” yesterday. The GBPJPY has broken below that line and the decline from the top is impulsive. As such, expect a corrective advance upwards of 161.00/50 prior to the next leg lower.
[I]Jamie Saettele publishes Daily Technicals every weekday morning (930 am EST), COT analysis (published Monday mornings), technical analysis of currency crosses throughout the week (EUR on Tuesday, JPY on Wednesday, GBP on Thursday, AUD on Friday), and the DFX Trend Index every day after the NY close. He is also the author of Sentiment in the Forex Market. Follow his intraday market commentary at DailyFX Forex Stream.
Please send comments about this report to <[email protected]>
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