Dollar Pullback Underway

-EURUSD decline not inspiring
-GBPUSD sell on advance above 1.6438
-AUDUSD sell on advance above .8096
-NZDUSD bearish impulse confirms top
-USDJPY triangle still preferred
-USDCAD near Elliott channel resistance

Euro / US Dollar

The EURUSD rally from 1.2886 has exceeded the level at which it would be equal to the 1.2454-1.3742 rally (1.4174), which puts 1.4723 at risk from a probabilistic standpoint. The alternate, in which a larger complex correction will end above 1.4723, does remain valid. Overbought and divergent daily RSI favors a top before 1.4723. Coming under 1.3792 would make it highly likely that a top is in place but if sufficient evidence arises that a top is in place prior to that point, then I’ll discuss as much here. Until then, it is best to wait for clarity.

British Pound / US Dollar

A former 4th wave price extreme at 1.6680 held as resistance and the GBPUSD has dropped below a support line from May 18. Coming under 1.5775 would bolster the bearish bias. I wrote yesterday that “given the 5 wave count from 1.4513 (wave C of the rally from 1.35), it is worth going short.” The GBPUSD is notorious for flat corrections so beware of a spike above 1.6438 prior to the next bear leg.

Australian Dollar / US Dollar

Nothing has changed regarding long term bearish implications (5 wave decline from 2008 high indicates additional bearish potential and the corrective rally from .6000 confirms as much). RSI divergence along with mature wave structure at multiple degrees of trend (3 waves up from .6000, 5 waves up from .6245 and 5 waves up from .6950) favors a reversal. Similar to Cable, a flat correction could lead to a spike above .8096 before resumption of the bear. If that happens, then look to go short against the high.

New Zealand Dollar / US Dollar

The NZDUSD reversed at the point that the rally from .5484 equaled the .4890-.5987 rally (.6581). This level is defended by the 50% retracement of the decline from .8220-.4890; at .6555. I wrote yesterday that “the subdivisions are clear and I favor the idea that the NZDUSD has topped.” The decline from the top (.66) is an impulse. Expect a corrective advance back to .6400/50 before the resumption of the bear.

US Dollar / Japanese Yen

The triangle count remains valid. Under this count, wave d (triangles unfold in 5 waves (a-b-c-d-e)) of a B wave triangle is underway towards 98-99. A drop below 93.50 would favor a bearish breakout strategy against 97.26.

US Dollar / Canadian Dollar

The speed of the decline from 1.1820 and the RSI extreme make it likely that the decline is a 3rd wave. I wrote yesterday to “favor a corrective rally to the 1.1180-1.1300 zone (Fibonacci and structural) before a drop to a new low to complete wave v of C.” There is potential Elliott channel resistance just above current price. Only a rally above 1.1475 would suggest to me that a bottom is in place.

US Dollar / Swiss Franc

The USDCHF count is the same as the EURUSD count (but as the inverse). There are 2 competing counts, one that calls for formation of a low prior to 1.0367 and one that gives scope to a drop below 1.0367 before a bottom and reversal. In the case of the latter, the current decline would be wave 3 of C and would extend from near current price. Only a rally through 1.0957 would suggest that a low is in place.

[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 <[email protected]>