Patterns are not clear at the current juncture, which is the hallmark of a correction. Still, coming under 1.4600 in the EURUSD indicates additional bearish potential.
On balance, the EURUSD ended little changed today (25th) but the intraday moves were large. This action is often indicative of at least a short term change in trend. Coming under 1.46 today is a sign of weakness and indicates to me that a larger decline is underway, perhaps as an X wave. It is possible that 1.4871 marks the top of wave B within the A-B-C decline that is underway from 1.6040. I do not view this count as probable given the structure in the other USD pairs. A deeper correction of the 1.3877-1.4871 advance is preferred although structure is not clear at the moment (it rarely is during a correction). If the decline extends, then look for support at the short term trendline and 1.4250 (the 61.8% of 1.3877-1.4871).
Echoing yesterday’s sentiments… “I am not confident at all in the USDJPY bearish bias against 106.90. Bears may have their day as long as price is below the short term trendline but the technical picture lacks clarity at this point. Also favoring USDJPY upside is the recent spike in volatility. Spikes in volatility usually mark USDJPY bottoms, at least for a few weeks anyway.” I didn’t have to wait long to be proved wrong. The USDJPY spiked through 107 today. Since the decline from 108 is not an impulse, expect a push above there next week. 105.44 should remain intact.
The advance from 1.7443 is in 3 waves but probably only the first leg of a larger correction. I favor this scenario because the breakdown that led to the decline to 1.7443 was from a triangle. Breaks from triangles often lead to a retracement that brings price back to the center of the triangle (at least). In this case, the center of the triangle is near the 61.8% of the entire decline from 2.1160; at 1.9658. Near term, weakness is favored in an X wave. 1.7904 is the 61.8% of the rally from 1.7443.
The USDCHF decline from 1.1422 is in 3 waves and possibly the first wave of a triangle of flat. In either case, the ensuing advance should retrace a good portion of the decline. The 61.8% of the decline is at 1.1135. This is also where the advance from 1.0799 would be equal to the 1.0686-1.0940 advance.
The USDCAD bounce from 1.03 may be a small 4th wave within the impulsive drop from 1.0827. Tracing out this 4th and then a 5th wave would confirm my longer term bearish stance. Expect resistance near 1.05 (38.2% Fibo is at 1.0493 and former 4th wave is at 1.0519) if needed. It is also possible that a 4th wave is complete at a triangle.
The AUDUSD B wave is underway towards the Fibonacci zone (.8247-.8076). There is a count (not shown), that treats the top at .524 as the end of an expanded flat. Both counts warrant positioning for a decline now, against .8524.
A B wave correction is probably also underway in the NZDUSD. The 3 wave rally from .6435 could be wave A of either a flat or triangle. In both cases, a large portion of the advance from .6435 would be retraced.
[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]