Like a detective inspecting the crime scene, a technical analyst inspects his charts. It is not the criminal we are after, but the earliest signs of trend change. The evidence is mounting in the case of the US dollar.
Euro / US Dollar
1.4850, which is the 100% extension of the 1.2327- 1.4723 rally, has been one of the levels that we've been focusing on as a possible turning point. The high is within 10 pips of that level and the top of a 2+ month channel provides resistance as well. The reversal yesterday is all the more important when considering the channel line. Use the support line (extended from 9/4 and 9/21 lows...in red on the chart) as a pivot. In other words, a drop below would indicate an opportunity to short.
British Pound / US Dollar
The neckline held Monday and is being tested again. Closing below the line would expose former resistance at 1.5740. 1.6260 and 1.6315 are short term resistance levels. Risk on shorts can be moved to 1.6475.
Australian Dollar / US Dollar
It is worth noting that the rally from .6245 is now exactly double the size (in price) as the .6005-.7275 advance. A and C waves sometimes relate to each other by factors of .618, 1, 1.618 or 2. Short term channel midline resistance rejected yesterday's high. Continued strength would expose .8950 (March 2008 low) and .9032 (78.6% retracement). Under .8640 is bearish.
New Zealand Dollar / US Dollar
The NZDUSD is similar to the EURUSD. Yesterday's reversal occurred at a channel confluence of sorts. The topline of a channel since July and the midline of a channel since March held. Coming under the support line extended from the 9/2 and 9/21 lows would indicate an opportunity to short.
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). After breaking above trendline resistance and trading to 92.50, the USDJPY retraced a significant portion of its recent rally and the top side of that former resistance line has held as support. Conditions are of the range variety for now.
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). Thus far, the 61.8% retracement of the rally from .9055 has held. Notice the short term pattern which could be an inverse head and shoulders in the making. Trade above the neckline, near 1.0800, would present an opportunity to target 1.1100.
US Dollar / Swiss Franc
The print below 1.0367 (December 2008 low) satisfies the minimum requirement for wave v of C. Divergence with momentum on nearly all time frames warns of a sharp turn against the Franc. It would take a rally through 1.0526/channel resistance in order to proclaim with confidence that a low is in place. Until then, focus is on the channel midline, which is at 1.0122 today and decreases about 10 pips per day.
Jamie Saettele publishes Daily Technicals every weekday morning, COT analysis (published Monday mornings), technical analysis of currency crosses on Monday, Wednesday, and Friday (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.
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