Dollar Threatens Break Out against Canadian Counterpart

Thu, 05 Mar 2009 09:06:57 -0500

By Jamie Saettele, Senior Currency Strategist

-EURUSD bulls and bears jockey for position
-GBPUSD short term picture unclear
-AUDUSD compressed
-USDCAD threatens break


Euro / US Dollar


Since the January 23th low, the EURUSD has unfolded in a triangle and terminal thrust or zigzag and ending diagonal or both.  The point is that all price action for over the past month has been corrective.  As such, know that once the turn occurs, it will be fast as turns that occur from ending diagonals are.  Until that turn occurs, the EURUSD likely continues its frustrating choppy trade.  There are 2 areas to look for longs; the low side of the diagonal line and a break of the top side.

British Pound / US Dollar


The count on the daily, which shows 5 waves down from the 2007 high, indicates that risk of a sharp advance is high.  The count that I am working with now treats the rally from 1.35 to 1.4990 as wave A of a flat (flats have subwaves 3-3-5).  B waves of flats retrace a significant portion of wave A, sometimes retracing more than 100% of wave A (in the case of an expanded flat).  With this risk, being long at this point against 1.3990 is risky.  Still, the next large move is expected to be up through 1.4990; it is unclear whether or not this occurs prior to a test of 1.35.

Australian Dollar / US Dollar


It is entirely possible that a larger flat is underway in the AUDUSD in the guise of a complex W-X-Y pattern that will end above .7275.  Exceeding .6562 would shift the odds in favor of this bullish interpretation.  Until then, the AUDUSD is in “no-man’s”land.

New Zealand Dollar / US Dollar


The NZDUSD has declined impulsively (5 waves) since its 2008 high and that decline was followed by a 3 wave rally (from the November low).  The drop from .6090 is viewed as beginning of the next bear leg.  Staying below .5201 keeps structure bearish.  However, the decline from .6090 is now in 5 waves and the risk of a sharp advance back to at least .5454 in a small second wave is high.

US Dollar / Japanese Yen


Resistance for the USDJPY is at 100.50 / 101; which is the November 4 high / 61.8% of the decline from 110.71.  RSI has been above 70 for 8 trading days now, which increases the probability of a reversal in the coming days.

US Dollar / Canadian Dollar


As I’ve favored the last few weeks, the triangle that has been underway since October is probably complete at 1.2020.  The breakout scenario is favored as long as price is above 1.2348.

US Dollar / Swiss Franc


Expectations are for the USDCHF to decline to at least 1.13.  This is where the ending diagonal, which are usually fully retraced, began. 

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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