The US dollar continues to look vulnerable although short term technical considerations do suggest dollar strength before a USD breakdown next week. The GBPJPY is resisted by a trendline and weakness is expected below 155.00.
[B]Euro / US Dollar[/B]
The count in which a 4th wave triangle is complete is favored so I want to position for a break above 1.4340 and then 1.4720. In other words, I suggest buying dips. It is possible that a small second wave is complete at 1.4118 but not probable given patterns in other USD crosses (which suggest short term USD strength before the break). Support is at 1.4055 (21 day SMA is at 1.4060 as well). The 61.8% of the rally from 1.3878 is at 1.4030 and reinforces support.
[B]British Pound / US Dollar[/B]
A triangle appears to be in its latter stages in the GBPUSD. Triangles consist of 5 waves (a-b-c-d-e) and the rally from 1.5980 would be wave d of the triangle. Favor the downside to at least 1.6260 near term in order to complete the triangle. Such a drop would correlate with a short term decline in the EURUSD.
[B]Australian Dollar / US Dollar[/B]
The AUDUSD series of lower highs (and lower lows) since the June high of .8270 is no longer as price has exceeded .8162. Recent commentary has focused on the fact that “bigger picture, the AUDUSD is at risk of a significant decline as the structure of the rally from .6005 is corrective (3 waves)…” While this is true, the larger decline will probably not occur until price exceeds .8269 in wave v of C. .8385 (61.8% of the decline from .9856) is potential resistance. Like the EURUSD and GBPUSD, a short term corrective decline is expected. RSI divergence along with a short term trendline support break favors weakness near term.
[B]New Zealand Dollar / US Dollar[/B]
The NZDUSD has exceeded its 2009 high of .6601. Expect additional strength over the next several weeks (at least) to complete the rally from below .50. .6950 (pivot high from September 2008) is potential resistance. Recent highs are divergent with intraday momentum, suggesting that the NZDUSD is at risk of a sell off near term.
[B]US Dollar / Japanese Yen[/B]
The drop below 93.50 eliminates the bullish triangle count and leaves us with the bearish count in which the decline from 101.50 is a series of 1st and 2nd waves. The USDJPY is resisted by the 200 day SMA as well as a line extended from the June 15, July 1, and July 2 highs. Bears are favored against 97.00.
[B]US Dollar / Canadian Dollar[/B]
The extent of the rally from 1.0782 almost assures that the entire decline from 1.3068 is complete. Additionally, the rally from 1.0782 unfolded as an impulse and the 5 wave decline from 1.1730 may be wave C of an expanded flat. Even if the larger trend remains down, then the USDCAD should correct a portion of the decline from 1.1730 since the drop from there is in 5 waves and lows are not confirmed by momentum (divergence). To this point, the USDCAD has headed straight down but failure to break below 1.0782 keeps the bullish bias intact.
[B]US Dollar / Swiss Franc[/B]
C7 Sticking with the USD bearish count, expectations over the next several weeks are for a thrust lower that ends below 1.0367. Near term resistance is at 1.0820. British Pound / Japanese Yen C8 The GBPJPY is resisted by a line drawn off of the June 12, June 30, and July 23 highs. Staying below 156.86 keeps the near term trend pointed lower towards a short term support line at 153.90. A drop below there exposes short term Fibonacci support at 154.30.
[B]British Pound / Japanese Yen[/B]
The GBPJPY is resisted by a line drawn off of the June 12, June 30, and July 23 highs. Staying below 156.86 keeps the near term trend pointed lower towards a short term support line at 153.90. A drop below there exposes short term Fibonacci support at 154.30.
Jamie Saettele publishes Daily Technicals every weekday morning (930 am EST), COT analysis (published Monday mornings), technical analysis of currency crosses throughout the week (EUR on Tuesday, JPY on Wednesday, GBP on Thursday, AUD on Friday), and the DFX Trend Index every day after the NY close. He is also the author of Sentiment in the Forex Market. Follow his intraday market commentary at DailyFX Forex Stream.
Please send comments about this report to <[email protected]>