The EURUSD made a weekly high today, confirming that a larger corrective advance is underway. This morning’s spike low at 1.4726 should remain intact for the rest of the week and perhaps all of next week.
We stand by the short term bullish outlook as EURUSD strength is proving us correct so far. To review, ‘the rally from 1.4631 and subsequent setback from 1.4908 to 1.4568 are waves a and b of either a triangle or flat.’ We favor the flat. A very short term trendline is holding, which bolsters the bullish outlook. A likely target, which may have to wait for next week, is the 1.4980-1.5080 zone.
The USDJPY simply has the ‘look’ of a top (head and shoulders). Only a break out of the 108-110.50 range is going to clarify directionality. It is worth mentioning though that 3 month volatility is at its lowest since the last late December. Low volatility historically indicates a high probability that a sharp drop is around the corner for the USDJPY.
There is little change to what was published last night. “Risk is to the upside (double divergence with 60 min RSI). The rally from 1.8512 and subsequent drop from 1.8793 could be the first two waves of a flat or a triangle. This would present range trading opportunities for the next few weeks between roughly 1.85 and 1.87. We would like to see a rally above 1.85 to bolster the range outlook.” The other possibility is that the final leg of a complex flat (wave y) is underway and will end above 1.8793. This would take a few weeks to unfold.
The USDCHF is in the same position as the EURUSD (but as the inverse). The recent 3 wave movements are either the first 2 legs of a triangle or flat. A bearish bias is warranted as long as price is below 1.1023. 1.0740 is potential support next week (8/11 low).
Expect a drop below 1.04. This would complete a complex corrective decline (W-X-Y-X-Z) from 1.0726. The 61.8% of .9974-1.0726 at 1.0261 is an area that would likely produce a bottom that leads to a rally through 1.0726. As long as price is below 1.0561 (and ideally 1.0495), maintain a bearish bias for the test of 1.0250/1.03.
The AUDUSD pattern is the same as the EURUSD. That is, a triangle or flat is underway and the immediate term trend is up. We wrote last night that “we expect a test of .8688 by the end of the week.” If a flat is underway, then the advance may accelerate while remaining above .8634.
There is no change to the Kiwi analysis. “The NZDUSD rally from .6824 and decline from .7215 are either waves A and B of a flat or triangle. The short term direction is most likely up until at least .71 in wave C of a triangle. In the case of a flat, price would exceed .7215 before rolling over.” Price should remain above .6970.
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]>