Forex Technicals: The Day Ahead, September 10

The US dollar fell early yesterday before mounting a comeback. There is no evidence of a bottom top but the advance is stretched.

There is no indication that a low is in place but there are a few things that do warn of a turn. RSI divergence on multiple time frames and oversold RSI on multiple time frames suggest weakness is limited. One can label the drop from above 1.49 as 5 waves. A rally through 1.4428 would indicate that a larger advance is underway.

Bigger picture, we continue to favor the downside. Price is now below the line that has held the entire advance from 95.72. On intraday charts, the USDJPY looks vulnerable to a push through 109.06 but the potential for a larger decline exists as long as price is below 110.65.

Cable is in the same position as the EURUSD. A rally through 1.7974 would signal that a larger correction is probably underway (back to 1.85/88). Until then, the pair is vulnerable to weakness, although oscillators on multiple time frames and sentiment measures suggest that weakness should prove limited.

The USDCHF is nearing a Fibonacci confluence (1.1453-1.1590). The December 2007 high at 1.1594 defends this area as well. Ideally, resistance is strong at and possibly ahead of these levels. The short term count shown above shows 5 waves complete, with wave 5 as an ending diagonal. A drop under the support line would be a sign that a larger decline is underway. Until then, the uptrend is intact.

Keep focused on the big picture. “The advance from .9055 may be nearing an end. For one, both legs of the advance are 3 wave structures and separated by a triangle. What we are left with is a complex corrective advance. As long as price is below 1.0927, there is the chance for a major top to form.”

Continued divergence with oscillators suggests that the low today was a B wave low in what will probably be an expanded flat. Risk is to the upside.

The structure of the decline from .7215 indicates that risk is to the upside. A rally above .6841 would signal that a larger correction is underway. Also, the new low in the AUDUSD today did not coincide with a low in the NZDUSD. This is a non-confirmation that may lead to larger rallies in both pairs.

[B]Jamie Saettele writes [I]Forex Technicals: The Day Ahead[/I], Monday-Thursday (published 6-7 pm EST), [I]Daily Technicals [/I] every weekday morning (9-10 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.[/B]


[B]Contact him at <[email protected]>[/B]