September has yet to bring the expected breakout - but it is only the 3rd day of the month. Patience is warranted. Keep an eye on the commodity currencies. The USDCAD is testing a resistance line from March. AUDUSD and NZDUSD are testing support lines from March.
Euro / US Dollar
As suggested yesterday, the underside of a former support line proved its worth as resistance this morning. For analysis on the EURUSD - view the monthly forecast, which discusses Fibonacci time relationships and bearish wave count implications.
British Pound / US Dollar
If a 4th wave triangle ended at the end of July, then the subsequent rally to 1.7050 was a terminal thrust and a significant top is in place. A drop below 1.5800 is required in order to confirm that a top is in place however. I wrote yesterday that “near term structure is not especially clear but a rally above 1.6390 could complete a flat correction from 1.6150. In such an event, fade the move against 1.6629.” We got that move above 1.6390 and potential resistance extends to 1.6450 (Fibonacci). Risk has shifted to the downside.
Australian Dollar / US Dollar
As the AUDUSD nears its 2009 high, the bearish short term pattern has been called into question yet remained valid. A drop below .8151 would negate any bullish potential and open up a move to .7700. The monthly forecast, published yesterday, touches on Fibonacci price relationships that warn of a reversal.
New Zealand Dollar / US Dollar
Coming under .6640 would negate the blow-off top scenario that I have discussed in recent weeks and also mean that channel support (since March) has been broken. In fact, that multi-month channel support is being put to test right now. Divergence with indicators MACD (shown here) and other momentum indicators also favors a reversal of the multi-month advance.
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). The rally earlier this year met former support and rolled over - which increases confidence in the bearish bias. At this point, the short term picture is quite bearish below 95.10.” I wrote yesterday that “divergence with momentum on shorter time frames warn of a corrective move higher. Resistance is 93.50.” The pair has turned up slightly, and a test of 93.40/50 would enable late bears to join in / those already short to add to the position. Short term traders may want to trade from the long side until 93.40/50.
US Dollar / Canadian Dollar
The USDCAD is similar to the EURUSD in that until the pair breaks its range, there is no directional bias. However, a 5 wave decline is visible from 1.3068. The decline could be wave A of an A-B-C corrective decline or wave C of a larger flat from the December 2008 high. Either way, bulls are favored until at least 1.1730.
US Dollar / Swiss Franc
The USDCHF is in the exact same position as the EURUSD. A C wave is either complete or will complete upon slipping beneath the December 2008 low at 1.0367. A rally above channel resistance would strongly suggest a low.
British Pound / Japanese Yen
Turning to a longer term view of the GBPJPY - the entire rally from 118.79 is viewed as corrective. A double top near the 50% retracement of the decline from 215.98 may mark the end of a 4th wave advance. Expectations are for the GBPJPY to eventually drop below 118.79 in a 5th wave. As mentioned yesterday, “divergence with RSI at recent lows warn of a rally - which could be sharp.” Resistance is 153.40.
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) and the DFX Trend Index every day after the NY close. He is the author of Sentiment in the Forex Market. Follow his intraday market commentary at DailyFX Forex Stream. Contact Jamie at firstname.lastname@example.org