The dollar continues to take a beating but intraday momentum studies are divergent with the new price extremes and short term wave patterns warn of a reaction. The larger trend does remain towards US dollar weakness however.
Euro / US Dollar
The EURUSD should continue to work higher and push through the December 2008 high in order to complete the entire rally from the October 2008 low. 1.4850 (100% extension of 1.2327-1.4850) is a potential target. The line extended from the March and June highs is also a potential target - that line is at 1.5100 this week and increases about 60 pips a week. Barring a drop below the support line drawn off of the April, August, and September lows, the trend is up to the mentioned levels. A small 4th wave retracement would enable traders to position long for the rest of the move. Support is at 1.4465. 4th waves are often choppy, complex affairs. If a 4th wave does unfold, then expect a triangle or flat.
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.
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. .8500/60 is short term support.
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 and a short term support zone is .6900/30. 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. Traders may look to sell advances against 1.1110 - potential resistance is at 1.0890 and 1.0940.
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. Near term, a 4th wave consolidation looks likely. Resistance extends to 1.0490.
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. Shorter term, the pair which may be forming a head and shoulders bottom since the end of August (circled - evident on intraday charts). The left shoulder was complex so I am expecting the same for the right shoulder. 150.00/80 is support. A dip to there should stoke demand.
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 email@example.com