Although the US dollar has edged to a new high against a number of other major currencies, chasing strength here is probably not a good idea. Short term structure along with oscillator divergence suggest that complex corrections are underway. One of the best opportunities is in the NZDUSD.
1.4671 was taken out and the EURUSD weakness has resumed. This is the long term count that we have favored for sometime. It calls for a bottom and reversal following completion of the drop from 1.6039, which is either the final leg of wave IV or the first leg of a new bear market. Either way, a sizeable bounce is expected to begin soon. Lower prices are expected as long as price is below 1.4695, in order to complete 5 waves down from 1.4908. There is a short term count that treats the drop to a new low as a b wave though. This would suggest a sharp rally in wave c that ends above 1.49 before a new low is registered. We’ll cover this count in the GBPUSD analysis.
Shorter term, the USDJPY is in a consolidation that has taken the form of a head and shoulders top. Coming under 108.98 would warrant a bearish bias against 110.00. Keep in mind the bigger picture that calls for a top and reversal in wave 2 and eventual decline below 95.72. We of course can not confirm that wave 2 is complete at 110.65 but the rally from 95.72 retraced a bit more than 50% of the 124.13-95.72 decline. 50% is a common level for wave 2 to end.
The count in red is the possible count that we mentioned at the end of the EURUSD analysis. The decline from 1.8793 is in just 3 waves to this point; which leaves open the possibility that the drop from there is a b wave of a flat and that a sharp rally will end above 1.8793 before price drops to a new low…again. Still, as long as price is below 1.8589, the GBPUSD is vulnerable to continued weakness in wave iii of v.
Stopping just shy of 1.11 this morning, the USDCHF count is similar to the GBPUSD count, but as the inverse. That is, the decline from 1.1032-1.0842 is either wave 4 or wave w within a complex wave 4. The complex interpretation remains valid because the advance from 1.0842 is in just 3 waves to this point. Coming under 1.0842 would complete wave 4 before a new high. Still, risk is to the upside as long as price is above 1.0922.
We know that the advance from .9974 is most likely the 3rd wave to complete the rally from .9055. As such, the USDCAD is vulnerable to weakness from current levels, especially given the corrective nature of the rally from 1.0418-1.0561. Watch for Fibonacci support, especially from the 61.8% at 1.0261 (this is also former congestion).
We got the drop to a new low and test of .85 but there is no evidence of a bottom yet. As long as price is below .8688, the AUDUSD is vulnerable to additional weakness. Again, there is a count that treats the decline from .8813 as wave x (since the decline is in just 3 waves). Under that count, price would exceed .8813 before dropping to a new low. Yet another count treats the drop as wave i of an ending diagonal. There are many possibilities right now…too many to make a confident forecast.
Kiwi has followed the path we set out. “The rally from .6824 is likely wave A of an A-B-C correction. Wave A took the form of a diagonal (leading). The next move should be lower in a B wave to at least .7038 and perhaps the 61.8% at .6973.” We get the drop to the 78.6% and the NZDUSD should be headed higher in a C wave that ends above .7215.
[B]Jamie Saettele writes [I]Forex Technicals: The Day Ahead[/I], Monday-Thursday (published at 6 pm EST), [I]Daily Technicals [/I]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.[/B]
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[B]Contact at <[email protected]>[/B]