The EURUSD is in a congestive state that will eventually break. Evidence warns of a sharp dollar advance, so the break could very well be lower. Evidence includes GBPUSD trendline resistance and signs of a top in the AUDUSD.
[B]Euro / US Dollar[/B]
Until a break above 1.4452 or below 1.4044, there is no directional bias. A rally above the range high opens up the door for an extension to the December 2008 high of 1.4720. Coming under 1.4044 would suggest that an important top is in place and that the longer term bear that began last summer has resumed. The indicator plotted below price is a congestion count. The value of the indicator is the number of consecutive bars that share at least one value. A high value denotes ‘congestion’ and warns of a breakout.
[B]British Pound / US Dollar[/B]
If a 4th wave triangle ended at the end of July, then the subsequent rally to 1.7050 was a terminal thrust and a significant top is in place. A drop below 1.5800 is required in order to confirm hat a top is in place however. Staying above there keeps open the possibility that an ending diagonal is unfolding from 1.5800. With a resistance line holding, favor the downside.
[B]Australian Dollar / US Dollar[/B]
As the AUDUSD nears its 2009 high, the bearish short term pattern has been called into question yet remained valid. A drop below .8151 would negate any bullish potential and open up a move to .7700. The risk of a sharp decline is high.
[B]New Zealand / US Dollar[/B]
Coming under .6640 would negate the blow-off top scenario that I have discussed in recent days and also mean that channel support (since March) has been broken. Shorter term trendline support is being put to the test right now. Divergence at multiple degrees of trend also favors bears.
[B]US Dollar / Japanese Yen[/B]
I want to show a longer term view of the USDJPY in order to remind readers why I have been so bearish (for a number of years). A 4th triangle ended in 2007 above 124.00 therefore the decline from that level is viewed as a 5th wave that will not be considered complete until price drops to an all-time low (below the 1995 low near 80). The rally earlier this year met former support and rolled over - which increases confidence in the bearish bias. At this point, the short term picture is quite bearish below 95.10.
[B]US Dollar / Canadian Dollar[/B]
The USDCAD is similar to the EURUSD in that until the pair breaks its range, there is no directional bias. However, a 5 wave decline is visible from 1.3068. The decline could be wave A of an A-B-C corrective decline or wave C of a larger flat from the December 2008 high. Either way, bulls are favored until at least 1.1730.
[B]US Dollar / Swiss Franc[/B]
The USDCHF is in the exact same position as the EURUSD. A C wave is either complete or will complete upon slipping beneath the December 2008 low at 1.0367. A rally above channel resistance would strongly suggest a low.
[B]British Pound / Japanese Yen[/B]
Turning to a longer term chat of the GBPJPY - the entire rally from 118.79 is viewed as corrective. A double top near the 50% retracement of the decline from 215.98 may mark the end of a 4th wave advance. Expectations are for the GBPJPY to eventually drop below 118.79 in a 5th wave.
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) 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. Contact Jamie at <[email protected]>