Dollar Shows Sings of Rolling Over

Tue, 03 Feb 2009 08:24:50 -0500

By Jamie Saettele, Senior Currency Strategist

-euro / dollar 1.27 an important bottom?
-GBPUSD bullish above 1.4050
-USDCAD back to 1.20?
-AUDUSD finds support from trendline confluence



Bigger picture, I still expect a large EURUSD rally to test the December high above 1.47.  Near term, the EURUSD continues to drop in a mature yet choppy (notice the overlapping waves within the decline) b wave.  The decline is now taking on the form of a triple zigzag (3 zigzags).  It is possible that wave (b) is complete at 1.2704.  A rally above last night’s high warrants a bullish bias against the 1.2704.  


The USDJPY remains in a quiet range as the pair continues to hold the double bottom that was made just above 87 in late January.  The larger trend does remain down.  The long term wave structure calls for a drop to an all-time low (below 80).  The trendline drawn off of highs from October 2008 and January as well as the 50 day SMA both favor bears.  Aggressive bears may wish to short against 91.33.  Waiting for a break below 87, to short against 91.33, is the higher probability trade.  


5 waves up from suggest that the larger GBPUSD trend has turned up.  An expanded flat may be complete at yesterday’s low of 1.4049.  There is a bullish opportunity against that level.  Measured objectives are in the 1.50-1.5550 zone.  Chart resistance is at 1.5378.


The next level of USDCHF measured resistance is where wave c of B would equal wave a of B; at 1.1822.  However, it is possible that a wave B top is in place now.  Those willing to take the risk can establish shorts against 1.2303, targeting a drop below 1.0367 over the next few months.  The decline from 1.1720 is promising for bears (can be counted as an impulse).


“The USDCAD should continue lower in wave e in order to complete the triangle that began in late October 2008.  Short term resistance is at 1.24.  The safest strategy is to wait for wave e to end before attempting a long position (maybe later this week?) against 1.1459 for a move upwards of 1.40.”  Near term, a drop below 1.2020 could complete wave e as a zigzag.  I’ll look to identify the bottom so be sure to check the alert box at dailyfx.


Short term structure is not clear in the AUDUSD.  This is often a sign that a correction is unfolding.  In the AUDUSD case, the decline from .7275 could be a B wave of a flat or triangle that began at the October low.  There is an extremely bearish count that places a wave (2) (or B) high at .7275.


I am presenting the NZDUSD daily chart today in order to convey the recovery potential although the pair is at its lowest level since December 2002.  There is a clear ‘5’ down from the 2008 high and a corrective advance from the 2008 low to .6090.  The decline from there is probably the first leg of the next bearish cycle.  An advance, albeit a corrective one, would likely reach the .5380-.5551 zone. 




Jamie Saettele writes Forex Technicals: The Day Ahead, Monday-Thursday (published at 6 pm EST), Daily Technicals every weekday morning (9 am EST), COT analysis (published Monday mornings), and analysis of currency crosses throughout the week.  He is also the author of Sentiment in the Forex Market.


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