Forex Technicals: The Day Ahead, September 17

The technical evidence suggests that the US dollar will retrace a portion of its gains since July. The biggest winner may be the British Pound.

We maintain that a corrective advance is underway from 1.3880. The rally to 1.4480 is probably wave a (the first wave) in a 3 wave correction. Wave b may be complete just below the 61.8% of 1.3877-1.4485.

The USDJPY dropped below the July low and promptly reversed. We have been expecting a resumption of the long term decline that began at 124.13. This is our preferred count as long as price is below 110.65. The alternate count treats the decline from 110.65 as an X wave within a complex correction.

The GBPUSD is headed higher in what may be a B wave within either a flat or triangle that is underway from 2.1160. As such, we are expecting a large portion of the decline from 2.1160 to be retraced. Resistance on the daily is not until 1.88. Similar to the EURUSD, a low could be in place at 1.7733.

5 waves down in the USDCHF from 1.1422 suggests that at least a temporary top is in place. Still, it appears that a small b wave and then c wave needs to unfold before there is an opportunity to sell the USDCHF against 1.1422. A potential path is mapped out on the chart.

The USDCAD reversed at a Fibonacci confluence (61.8% ext. of the .9055-1.0378 advance and 61.8% retrace of the decline from 1.1875 to .9055). We are expecting an important top to form. That top could be in place just above 1.08.

The daily line chart sheds some light on what may be happening with the AUDUSD. Viewing this chart, one can see a clear 5 waves down. In fact, waves 3 and 5 subdivide into 5 waves each and there is divergence between the momentum of waves 3 and 5. This warns of a low.

5 waves down from .7921 appear to be complete. As such, a countertrend move back to the .7200 area or higher is expected. This level intersects with the underside of a former support line that was broken in August. The NZSDUSD has held up better than the AUDUSD, staying above the low made last week. This is a potential divergence that warns of a larger advance.

[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]