The EURUSD rallied over 2% today (second largest one day rally in its history). However, bulls should exercise caution at the current juncture as potentially strong resistance at 1.49 looms.
The EURUSD experienced it second biggest gain in one day ever…rising over 2%. The pair is just below what I think will be strong resistance from the 50% of 1.6040-1.3877 and 8/21 high above 1.49. From a wave structure stand point, the recent rally is probably wave iii of either a c wave or larger 3rd wave. This means that the EURUSD is vulnerable to a pullback soon (in a wave iv correction). Again, expect resistance near 1.49.
This morning, I cited 107.46 as a level to stay bearish against because there is the possibility that the USDJPY is headed lower (much lower and the move could be extremely fast). The bearish level in the sand now is 106.90.
There is no reason to alter the bullish view but watch for resistance near 1.878. This is the confluence of the 38.2% of the entire decline from 2.1160 as well as daily highs from August. Not shown on the chart is a Fibonacci extension at 1.8815. In summary, expect strength to continue into roughly 1.88, but then the GBPUSD will be vulnerable to a wave iv corrective decline.
The USDCHF fell hard in what may be a C wave. C waves unfold in 5 waves and the decline from 1.1284 is not yet in 5, so expect additional weakness. A Fibonacci extension at 1.0457 may provide support.
I showed short term charts all last week for timing purposes. Now though, be sure to take a look at why I wanted to get bearish in the first place. The rally from .9055 is in 3 waves (corrective). This could be just the first 3 wave move in a more complex move (flat?) or a completed 3 wave correction. In either case, the USDCAD likely heads much lower from here. The first support is not until the center of the triangle; at 1.01.
The AUDUSD continues to advance and a return to .8750/.88 is still expected over the next several weeks. The advance from .7799 is impulsive and probably wave A of an A-B-C zigzag. A wave B decline should begin soon and bring price back to at least .8266 before strength resumes.
To repeat what I have said over the past week…”A countertrend move back to the .7200 area or higher is probably underway. This level intersects with the underside of a former support line that was broken in August.” Near term, the NZDUSD may be nearing the end of a 3 wave movement from the low. While this could be the first leg in a triangle or flat, risk is quickly shifting to the downside.
[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]
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[B]Contact him at <[email protected]>[/B]