Dollar Range Contracts

Thu, 09 Apr 2009 10:07:10 -0400

By Jamie Saettele, Senior Currency Strategist

-EURUSD resistance at 1.3415; trend still down
-AUDUSD sights on multi month high
-USDJPY still ranging at 61.8%
-USDCAD tests key support


Euro / US Dollar


The fractal nature of the market has been on full display in the EURUSD since the top last year at 1.60.  There are 5 waves down and 3 waves up at 2 degrees of trend.  The ‘1-2’ down from 1.4723 is waves 1 and 2 of the next 5 wave decline.  At this point, price should remain below 1.3586.  Price ideally remains below 1.3339 but a push above there would shift short term focus to 1.3415.

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.  I wrote yesterday that “that pattern appears to have played out so price ideally remains below 1.4775 although risk should be kept above 1.4962 in order to avoid stops getting hit on spikes that could result from tomorrow’s BoE announcement.”  Cable pushed above 1.4775 by 3 pips today before rolling over.  Keep risk at 1.4970.

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


Bears can move risk from .6090 to .5990.  There are 5 waves down from that .6090, 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 (especially with price holding above the 200 day SMA).  Perhaps the 61.8% is the level that will lead to weakness.

US Dollar / Canadian Dollar


The USDCAD is testing 1.2220 yet again.  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 1.2223, I favor the upside. 

US Dollar / Swiss Franc


Like the EURUSD, the USDCHF may have resumed its longer term trend towards USD strength.  Bulls can move risk to below 1.1238. 

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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