US Dollar: Probability of a Breakout Increases

  • EURUSD bearish below 1.4030
  • GBPUSD may test 1.5800
  • AUDUSD and NZDUSD bearish short term patterns

Euro / US Dollar

The EURUSD pattern may be clearing up (fingers crossed). I wrote Thursday that “it is still possible that the rally from 1.3750 is unfolding as a diagonal. Staying above 1.4000 keeps this count valid. However, there are numerous bearish counts that would result in price dropping below 1.3750 (one shown above). Coming below 1.4000 would favor the downside.” While a triangle is possible from above 1.4300, so too is a flat (price would come under 1.3750). It is also possible that a significant top is in place above 1.4300. Near term structure is bearish against 1.4030.

British Pound / US Dollar

The drop below 1.6231 favors additional weakness below 1.5800. The rally from 1.5800 counts best as a 3 wave rally and 3 wave rallies occur in B or X wave positions, diagonals, and triangles. All of these are possible right now. The B or X wave interpretation seems most probable given the EURUSD decline below 1.4000.

Australian Dollar / US Dollar

The decline from .8162 is an impulse (5 waves), which suggests that the larger decline has turned down. There is potential resistance at the former 4th extreme above .8000.

New Zealand Dollar / US Dollar

The short term NZDUSD pattern is the same as the short term EURUSD pattern. The decline from .6555 is in 5 waves and 5 wave movements occur in the direction of the larger trend. Initial resistance is at .6350 (former 4th wave extreme).

US Dollar / Japanese Yen

The triangle continues to play out but there is an alternate bearish count in which the drop from 101.50 is a series of 1st and 2nd waves. 93.50 defines the trend (above is bullish and below is bearish). There is little else to say about the USDJPY at this point. One can not force analysis upon choppy, unclear market structure. Sometimes (this is that time), the correct decision is to do nothing and await clarity.

US Dollar / Canadian Dollar

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 is unfolding as an impulse. Eventually, a small 2nd wave correction will give way to a larger advance. When that corrective decline occurs, I’ll look to buy the dip.

US Dollar / Swiss Franc

The USDCHF is still stuck in its 1.06-1.10 range. We are left with competing counts, shown with labels above, until a break of the range. If the trend has turned up, then 1.0825 should remain intact.

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.

Please send comments about this report to <[email protected]>[/I]