Dollar Advance Gains Traction

Tue, 07 Apr 2009 09:52:15 -0400

By Jamie Saettele, Senior Currency Strategist

-EURUSD 1.31 in sight
-GBPUSD triangle underway to 1.40
-NZDUSD rolls over from overbought condition
-USDJPY tests Fibonacci resistance
-USDCAD bullish above 1.22


Euro / US Dollar


I wrote yesterday that “the rally from 1.3111 is in 3 waves, although wave C is extended.  In order to stay bearish, the EURUSD needs to decline now.  A drop below 1.3350 would instill confidence in the bearish count.”  The bearish count is playing out.  At this point, price should remain below 1.3586.  The decline from that point is not an impulse (5 waves) yet but is unfolding in such a manner. 

British Pound / US Dollar


Price action since 1.35 is a 4th wave that will end as either a triangle or flat.  IF a triangle is underway, then wave D is working lower towards 1.40 now.  Near term, there is resistance above 1.4775.  A rally above that level could complete a small expanded flat.

Australian Dollar / US Dollar


At this point, it is simply a wait and see game for the AUDUSD.  The longer term downtrend is expected to resume soon.  What is unclear is whether or not weakness resumes before a push above .7275.  A push there .7275 could complete a complex correction from .60.  Either way, I am looking to go short.

New Zealand Dollar / US Dollar


Bottom line; the NZDUSD is bearish as long as price is below .6090.  There are 5 waves down from that level, indicating that the long term trend remains down.  An expanded flat correction has unfolded from the February 2 low (.4958).  Wave c is in 5 waves, RSI is divergent and in overbought territory.  Weakness is expected.

US Dollar / Japanese Yen


The USDJPY has traded through the 200 day SMA and the 61.8% of 110.71-87.09 at 101.  The next level of potential resistance is a resistance line drawn off of the July 2007 and August 2008 highs.  That line is at 103.75 this week and decreases about 20 pips per week.  Only a drop below 95.92 would suggest that a top is in place at this point.  Although COT data warns of a sentiment extreme, psychology can remain one sided for some time.  Weakness is what I am looking for, but until there are signs of such, it is dangerous to be short.  Perhaps the 61.8% is the level that will lead to weakness.

US Dollar / Canadian Dollar


5 waves up from 1.2197 suggest that a larger bull trend has started.  The decline from 1.2720 is deep, but wave rules require that wave 2 retrace less than 100% of wave 1.  Thus, as long as price is above 1.2197, I favor the upside. 

US Dollar / Swiss Franc


Like the EURUSD, the USDCHF may have resumed its longer term trend towards USD strength.  Near term, bulls are in control as long as price is above 1.2222.  Staying above 1.1157 keeps the bullish count on track.

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.

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