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The dollar bear is strong but exhaustion will eventually set in. The EURUSD rally above 1.4720 satisfies the minimum requirement for wave C (from 1.2456). A measured objective is at 1.4850 and former support at 1.5300 is also a level to keep in mind.
Euro / US Dollar
The EURUSD has exceeded the December 2008 high and is approaching 1.4850 (a 100% extension), which is a potential target. The line extended from the March and June highs is also a potential target – that line is at 1.5160 this week and increases about 60 pips a week. RSI is above 70, divergent with the December high (RSI reached 79 then) and former trendline support turned resistance is right at current price. The risk of a bearish reversal is high but until there are signs of such (candle pattern or short term wave pattern for instance), it is dangerous to be short.
British Pound / US Dollar
On the daily, a potential head and shoulders top is evident (although the pattern can not be confirmed until price breaks below the neckline – which is near 1.6200). Bolstering the bearish bias is the shorter term head and shoulders top (which comprises what may be the larger right shoulder), which is confirmed. Bears are favored against 1.6665.
Australian Dollar / US Dollar
The AUDUSD continues to work higher towards the 78.6% of the decline from .9856-.6007, which is .9032. This level intersects with a potential resistance line on September 24. Former support at .8951 is also a level to keep in mind. Momentum indicators are divergent (not shown). The message is the same here as for the EURUSD – the risk of a reversal is high and increase with each tick higher in price.
New Zealand Dollar / US Dollar
A NZDUSD objective is .7250. This is where the rally from .6193 would be equal to 61.8% of the .4890-.6601 rally. The level also rests in between 2 prominent former pivots (.7222 and .7384). Weakness near there would warrant a closer look. Divergence with DDiff (derived from DMI) warns of a reversal.
US Dollar / Japanese Yen
Keep the long term outlook in perspective – “a 4th triangle ended in 2007 above 124.00 therefore the decline from that level is viewed as a 5th wave that will not be considered complete until price drops to an all-time low (below the 1995 low near 80).” At this point, former support in the 91.73/94 zone is potential resistance.
US Dollar / Canadian Dollar
Barring a break above the resistance line, the USDCAD is vulnerable to a drop towards 1.0330 – which has been both support and resistance over the last several years. This level is also the 61.8% extension of the 1.3068-1.0782 decline (from 1.1730).
US Dollar / Swiss Franc
“The print below 1.0367 (December 2008 low) satisfies the minimum requirement for wave v of C.” An objective is 1.0037 (100% extension). Trading above channel resistance would indicate with a high probability that a low is in place.
Jamie Saettele publishes Daily Technicals every weekday morning (930 am EST), COT analysis (published Monday mornings), technical analysis of currency crosses on Monday (Euro and Yen crosses), and intraday trading strategy as market action dictates. He is the author of Sentiment in the Forex Market. Follow his intraday market commentary at DailyFX Forex Stream.
Contact Jamie at jsaettele@dailyfx.com if you would like to receive his reports via email.
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