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The dollar has broken down and focus now shifts to the December 2008 extremes in the EURUSD and USDCHF as well and calculated extensions in other pairs. Trendlines and channels define trends but momentum remains divergent with price – which suggests that these moves are terminal.
Euro / US Dollar
The break to fresh 2009 highs negates reversal implications and sets the stage for an assault on 1.4723 (December 2008 high). 1.4850 (100% extension of 1.2327-1.4850) is a potential target. Barring a drop below the support line drawn off of the April, August, and September lows, the trend is up to the mentioned levels. 1.4395-1.4410 is a short term support zone.
British Pound / US Dollar
The GBPUSD may be working higher to form the right shoulder of a head and shoulders top. The left shoulder’s price extreme was 1.6750 – which is potential resistance. Barring completion of a head and shoulders (which would require right shoulder formation followed by a neckline break), the uptrend must be respected.
Australian Dollar / US Dollar
The next AUDUSD objective is .9032 (78.6% of .9856-.6005). Similar to the EURUSD, a support line (channel support in this case) defines the trend.
New Zealand Dollar / US Dollar
The next NZDUSD objective is .7250. This is where the rally from .6193 would be equal to 61.8% of the .4890-.6601 rally. Again, channel support defines the trend. MACD is an interesting development. The indicator itself appears to be forming a head and shoulders (divergence) – which warns of a reversal in the weeks ahead.
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). The rally earlier this year met former support and rolled over – which increases confidence in the bearish bias. At this point, the short term picture is bearish below 93.30.
US Dollar / Canadian Dollar
Resistance has held in the USDCAD and the pair is threatening its early August low. Barring a break above the resistance line, weakness is favored until 1.0330 – which has been both support and resistance over the last several years. This level is also the 61.8% of .9055-1.3068.
US Dollar / Swiss Franc
The USDCHF is in the exact same position as the EURUSD. A C wave will probably be complete following a drop below 1.0367. A target is 1.0037 (100% extension of 1.2303-1.0367 decline). Only a rally above channel resistance would suggest that a low is in place.
British Pound / Japanese Yen
The GBPJPY has turned up ahead of its July low (146.74). A head and shoulders top may be forming. Even if one is forming, a rally is expected to form the right shoulder. Potential resistance, from Fibonacci and former resistance, is 157.72.
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). He is also the author of Sentiment in the Forex Market. Follow his intraday market commentary at DailyFX Forex Stream. Contact Jamie at jsaettele@dailyfx.com
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