Forex Technicals: The Day Ahead, September 2

The USDJPY has rolled over to confirm a head and shoulders top and the USDCHF appears to be forming the same pattern.

Due to technical difficulties, we are unable to provide charts today. This matter will be fixed as soon as possible. We apologize for the inconvenience.


We maintain that price action since 1.4631 is corrective and that the EURUSD is headed higher in either a triangle or flat. If a flat, then price would exceed 1.4908 in the coming weeks. If a triangle, then we should see 1.47 and perhaps 1.48 this week. It also remains possible that something much more significant is in stores for bulls. COT readings are the most extreme (indicating extreme dollar optimism and extreme euro pessimism) that they have ever been and price continues to hold above trendlines from 2002 and 2006. Coming under 1.4568 exposes lows from late 2007 and early 2008 in the 1.43-1.4450 zone.


The bearish bias is proving correct so far. Recent commentary stated that “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.” Briefly coming under 108 today, the USDJPY should continue to decline (as long as price is below 109.73). Resistance is at 108.65 and 109.


The GBPUSD continues to slide, but it is clear that 5 waves are nearing completion from the July 15 top. A large correction, back to at least 1.88, is expected to begin soon. The pair is vulnerable to continued weakness until further notice.


An inverse head and shoulders presents a bearish opportunity for those trading the USDCHF. Risk is tight at 1.1079. The break below a short term trendline supports the bearish case.


The USDCAD is nearing a potential turning point. A push through 1.0726 in the coming days would possibly complete the entire advance from .9055 as a correction. A short term bullish bias is warranted against 1.0411. Short term support is at 1.06. Objectives are anywhere from 1.08 to 1.12.

As long as price is below .8692, there is potential for the AUDUSD to slide lower in a 5th wave (iii of 5). A long term support line at .82 would be potential support. Of course, chasing the pair lower here is not a good idea because there is an alternate that allows for strength through .8813 in order to complete a flat.

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.”

[B]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), [U]COT analysis[/U] (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 at <[email protected]>[/B]