Trading is a business of probabilities, not certainties. Daily wave counts and other technical evidence suggest that the next major move in the FX market will be one of US dollar strength. Levels are clearly defined. In the case of the EURUSD, price needs to stay below 1.4680 in order to keep the path of lower prices on track.
Euro / US Dollar
As long as the EURUSD is below 1.4680, my working assumption is that an important top is in place above 1.4800 (either a B wave or 2nd wave high within the bear that began at 1.6000 in 2008). I have received numerous emails pointing out that the decline from the top is not an impulse and therefore the larger uptrend is intact. There is a plethora of big picture bearish evidence, including daily wave count (far more important than hourly wave count), COT and other sentiment indicators, etc. Also, the decline from 1.4550 could be a leading diagonal as wave i and the rally to 1.4680 wave ii. My point is that the big picture evidence points to a big decline and it would foolish to ignore that evidence. That is not to say that it is not possible that the rally continues. There are no certainties. Again, 1.4680 is the pivot. Short term resistance levels are 1.4575 and 1.4615 (watch the trendline as well).
British Pound / US Dollar
Former support held as resistance (1.6111) and a short term channel defines the trend for now. A near term target is 1.5290 (161.8% extension of 1.7050-1.6111). The trend is down below 1.6130. 1.5923 is potential resistance.
Australian Dollar / US Dollar
Following the break to a new 2009 high, the AUDUSD has declined in a clear 5 waves. .8666-.8720 is the resistance zone and bears are favored against the high (.8866). If that level fails to hold, then focus would shift to .8950 and .9030. .8950 is a former support level and .9030 is the 78.6% retracement of the decline from the 2008 high.
New Zealand Dollar / US Dollar
NZDUSD price action since its 2009 high has been choppy. The topline of a channel since July and the midline of a channel since March rejected the NZDUSD advance but the NZDUSD has yet to come off much. I wrote yesterday that coming under .7100 would probably induce selling pressure and send the pair to .6900. Until then, the waters are murky. The drop below .7100 materialized and the trend is bearish below .7260 towards .6900. .7153 and .7175 are short term resistance levels.
US Dollar / Japanese Yen
Former support held as resistance earlier this week, which kept us bearish. Additional comments this week were while the trend is bearish below 91.65, the strength of the rally from channel support warrants consideration that a more important low is in place. Trading above the short term resistance line extended from the 9/21 and 9/24 highs would be a sign that something more constructive is taking place. For this reason, move risk on shorts to 90.50. This strategy has served us well as price has not exceeded 90.50 or the short term resistance line. We'll remain bearish below there, targeting a drop below 87.10.
US Dollar / Canadian Dollar
Maintain a bullish bias above 1.0650. The rally from 1.0588 could be a series of 1st and 2nd waves. This count is extremely bullish and gives scope to an extended rally. With the USDCAD back above the former channel, confidence in the upside is increased. Clearing 1.1130 would expose 1.1417 (former support).
US Dollar / Swiss Franc
The USDCHF daily wave count warns (and has been warning) of a significant low. The USDCHF has broken through the top of a short term channel and is just below the top of a longer term channel line. Favor the upside.
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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