The EURUSD and USDCHF patterns suggest that the larger trend is in favor of the US dollar. However, important levels have been broken in the AUDUSD and NZDUSD and the USDCAD is expected to drop below 1.0780 before a low forms. At this point, there is no overriding technical theme.
Euro / US Dollar
The EURUSD pattern suggests that the pair is about to plunge. 5 waves down from 1.4340 make up wave 1 or A of a 5 or 3 wave bearish sequence. The rally from 1.3804 is in 3 waves, which confirms that the larger trend is down. The minimum objective is below 1.3804 although there is much greater bearish potential. There is the risk of a push above last night's high (1.4060) prior to resumption of weakness.
British Pound / US Dollar
The structure of the decline from 1.6667 is not clear but I have been expecting a significant reversal as the rally from 1.3500 is viewed as wave 4 within the 5 wave decline from the 2007 high. I am not confident in the bearish position against 1.6667 at this point for a number of reasons. 1. Cable has retraced more than 61.8% of its previous decline and 2. The rally from 1.5800 to 1.6476 is an impulse (5 waves). Remaining above 1.6239 keeps the near term trend pointed higher.
Australian Dollar / US Dollar
The AUDUSD rally through .8128 negates the short term bearish bias and leaves the decline from .8269 as just a 3 wave affair, which is corrective. Also, the advance from .7823 can be counted as 5 waves now although wave 4 is large compared to wave 2. Continued strength near term would make it more likely that the rally from .7823 is also a 3 wave correction with .7964 as the end of wave b. Evidence suggests that a triangle or flat is underway from .8269. .8200 is potential resistance.
US Dollar / Japanese Yen
The triangle continues to play out. Wave d of the triangle is either complete or in its latter stages. A decline in wave e could lead to a sharp decline as low as 95 before the terminal thrust in wave C (that will eventually end above 101.50).
New Zealand Dollar / US Dollar
The NZDUSD rally above .6422 negates the near term bearish bias and warns of additional strength. However, my focus remains on the longer term structure, especially the rally from .4890, which is a textbook zigzag. Waves A and C are equal, which is common.
US Dollar / Canadian Dollar
A rally above 1.1475 would be strong evidence that a significant low is in place. Until then, the USDCAD is vulnerable as wave v of C is expected to end below 1.0782.
US Dollar / Swiss Franc
The USDCHF pattern is the exact same as the EURUSD (but as the inverse) 5 waves up from 1.0589 suggest that an important low is in place. Favor the upside against there.
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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