Daily Advance: Here to Stay!?

The dollar rally has led to clarification. Expectations are for the EURUSD to drop below 1.3800, the AUDUSD below .8270, the NZDUSD below .6470, and the USDCHF above 1.1000. The USDJPY remains confined to a triangle that is in its latter stages.

Euro / US Dollar

5 waves down from 1.4340 make up wave 1 or A of a 5 or 3 wave bearish sequence. The rally from 1.3804 morphed into a complex correction but the implications remain bearish. The minimum objective is below 1.3804 but bearish potential is much greater.

British Pound / US Dollar

The structure of the decline from 1.6667 is not clear but I have been expecting a significant reversal as the rally from 1.3500 is viewed as wave 4 within the 5 wave decline from the 2007 high. Coming below 1.6239 would break the series of higher highs since 1.5800 and signal that the larger trend is down.

Australian Dollar / US Dollar

I wrote yesterday that “continued strength near term would make it more likely that the rally from .7823 is also a 3 wave correction with .7964 as the end of wave b. Evidence suggests that a triangle or flat is underway from .8269. .8200 is potential resistance.” The AUDUSD has reversed ahead of .8269 and expectations are for a decline to extend from current levels and end below .7823.

New Zealand Dollar / US Dollar

The NZDUSD rally above .6422 negates the near term bearish bias and warns of additional strength. However, my focus remains on the longer term structure, especially the rally from .4890, which is a textbook zigzag. Waves A and C are equal, which is common.

US Dollar / Japanese Yen

The triangle continues to play out. Wave d of the triangle is either complete or in its latter stages. A decline in wave e could lead to a sharp decline as low as 95 before the terminal thrust in wave C (that will eventually end above 101.50).

US Dollar / Canadian Dollar

The decline from 1.3068 can be counted as a completed 3 wave decline (A-B-C with wave B as a triangle). I wrote yesterday that the USDCAD was vulnerable to weakness below 1.0782. It remains possible that the USDCAD will drop to a new low but not probable. The speed of the advance from 1.0939 is reminiscent of an impulse.

US Dollar / Swiss Franc

The USDCHF pattern is the exact same as the EURUSD (but as the inverse) 5 waves up from 1.0589 suggest that an important low is in place. Risk can be moved up to 1.0640.

[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.

Please send comments about this report to <jsaettele@dailyfx.com>