US Dollar gains are corrective, indicating that the Dollar trend is down for the time being. Still, there are important levels to watch going forward that may yield reversals.
The EURUSD short term pattern remains bullish. It is possible that the small 4th wave is complete. This wave 4 could also end as a triangle or flat (likely since 4th waves are often ‘tricky’). 1.4546 remains the bullish line in the sand and resistance may be strong in the 1.49-1.50 area.
Don’t let the USDJPY lull you to sleep. This is what it does before it makes a major move. The bearish level in the sand now is 106.90. Staying below there keeps the short term trend down potential for the decline to accelerate in a 3rd of a 3rd that will eventually break below 103.52 (and much lower). Confidence in the bearish bias is waning with each passing session though.
There is no reason to alter the bullish view but watch for resistance near 1.878. This is the confluence of the 38.2% of the entire decline from 2.1160 as well as daily highs from August. Not shown on the chart is a Fibonacci extension at 1.8815. In summary, expect strength to continue into roughly 1.88, but then the GBPUSD will be vulnerable to a pullback (much like the EURUSD).
Clarity is lacking with the USDCHF. The decline from 1.1284 traveled a bit further than the 1.1422-1.0897 decline. Equality among wave distance is common in corrections and suggests that a bottom is in place at 1.0686. However, this scenario does not fit with the EURUSD and GBPUSD, which have a good chance of working higher before rolling over.
Keeping in touch with the bigger picture, the rally from .9055 is in 3 waves (corrective). This could be just the first 3 wave move in a more complex move (flat?) or a completed 3 wave correction. In either case, the USDCAD likely heads much lower from here. The first support is not until the center of the triangle; at 1.01. Bears can move risk to 1.0566.
Having reached former support, the B wave could be complete at .8275. However, B waves are rarely this clean. Watch for a flat or a triangle. In the case of a flat, wave B would end below .8275; in the Fibonacci zone (.8247-.8076).
To repeat from yesterday…“the NZDUSD may be nearing the end of a 3 wave movement from the low. While this could be the first leg in a triangle or flat, risk is quickly shifting to the downside.” It is possible that the NZDUSD turns up from here to complete a ‘5’ (5 waves) from .6435 but the position of the AUDUSD suggests that the small B wave corrections are already underway. As such, expect weakness to at least .6635.
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.
Contact at <[email protected]>