Euro Drop Accelerates; Breakdown Level is 1.3750

US dollar crosses remain confined to their respective ranges but a US dollar breakout may be just around the corner. 1.3750 is the breakdown level for the EURUSD.

Euro / US Dollar

There is no change to the bearish outlook. Staying below 1.4181 keeps the trend pointed down. The series of lower highs and lows since 1.4340 may be a series of 1st and 2nd waves. Under this scenario, the decline from 1.4014 a third of a third (powerful) wave decline. It is also possible that the current decline is wave 4 of a diagonal from 1.2454 (alternate labels). A drop below 1.3747 would enable bears to move risk to 1.4014. The outlook for equities supports USD bulls also.

British Pound / US Dollar

It remains possible that the GBPUSD has made a significant high. Remember, the entire decline from 2.1160 is most likely unfolding as an impulse (5 waves) and just 3 waves have unfolded. The rally from 1.3500, although strong, still counts well as a correction (3 waves). In fact, price reached and reversed at a former 4th wave (common guideline). The rally from 1.5800 was an impulse, making it possible that wave v of C was truncated. Staying below 1.6626 keeps the topping scenario intact.

Australian Dollar / US Dollar

The AUDUSD count shown above is similar to the GBPUSD in that wave v of C may be truncated. The rally from .7823 is in 5 waves but failed to exceed .8269. Usually, this would signal that an entirely new bull cycle is underway. But given the extension of the rallies from .6245 and .6986, this scenario is not probable.

New Zealand Dollar / US Dollar

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. The NZDUSD unexpectedly exceeded .6474 Friday, thereby negating the short term bearish structure. The bearish implications from the aforementioned evidence remains however.

US Dollar / Japanese Yen

The triangle continues to play out. Wave e of the triangle should complete later this week. There is potential support at 95. There may be an opportunity to go long the USDJPY soon against 93.50 on anticipation of the terminal thrust that will end above 101.50. However, in looking at multiple markets (equities, metals, oil, FX), it appears that fear is about to return to the markets with a vengeance. As such, the USDJPY count in which the drop from 101.50 is a series of 1st and 2nd waves would be preferred. 93.50 defines the trend (above is bullish and below is bearish).

US Dollar / Canadian Dollar

The rally above 1.1475 makes significantly increases the probability that 1.0782 was the end of the corrective decline from 1.3068. Risk should be kept to 1.0940 in the event that the recent rally completed a small 3rd wave. Once the USDCAD completes 5 up from 1.0782, I’ll look to exit.

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. Having yet to exceed 1.0990 (3 wave decline from there), favor the upside against 1.0650. A small second wave may complete after the test of Fibonacci support at 1.0770.

[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]>[/I]