US Dollar Decline is Corrective



Thu, 09 Jul 2009 10:02:18 -0400



By Jamie Saettele, Senior Currency Strategist strategist@dailyfx.com




- EURUSD bearish below 1.4060
- GBPUSD rally stalls at Fibonacci / structural resistance
- AUDUSD range break; bearish against .8050
- NZDUSD fractal nature
- USDJPY break clarifies pattern
 

7-09-09Dailys-01

Euro / US Dollar
7-09-09Dailys-02

Until a break below 1.3747, there are numerous competing counts, including a triangle count as wave 4 within a diagonal from 1.2454.  Bigger picture, I do expect weakness in the EURUSD but I’m not sure whether or not that decline occurs from here or after one more rally (above 1.4720).  At this point, the bearish count shown above is valid against 1.4057.  Reward / risk is worth a short at the current juncture.

British Pound / US Dollar

7-09-09Dailys-03

I’ve written recently that “the rally from 1.5800 counts best as a 3 wave rally and 3 wave rallies occur in B or X wave positions, diagonals, and triangles.  All of these are possible right now.  The decline from 1.6750 can be counted as a 5 (impulse), which favors the expanded flat count in which the GBPUSD will eventually drop below 1.5800.  In this case, the leg lower from 1.6750 would be wave i or a (complex).  There is the risk of a rally back to at least 1.6300 in order to correct the decline from 1.6750 (RSI divergence favors this interpretation).”  After dipping below 1.6000 yesterday, the GBPUSD has rallied back to 1.6300.  This is the beginning of the Fibonacci resistance zone (38.2% of decline from 1.6750) as well as structural resistance (former 4th).  Fibonacci resistance extends to 1.6450.  If the presented EURUSD bearish count is correct, then the GBPUSD should reverse not far from current levels.  Risk, however, is much greater.

Australian Dollar / US Dollar

7-09-09Dailys-04

The AUDUSD has finally broken its range (this is a sign that the EURUSD and GBPUSD are to follow).  The pair is contained by a false (non-Elliott) channel right now, but such channels do not hold.  There is potential resistance from Fibonacci at .7920.  The trend is considered down against .8044.  If the above count is correct, then the decline should accelerate within the next several days.   

New Zealand Dollar / US Dollar

7-09-09Dailys-05

The short term NZDUSD pattern is a beautiful depiction of a free market’s fractal nature.  The decline from .6550 to .6240 was in 5 waves and the subsequent rally to .6400 was in 3 waves.  Similarly, the decline from .6400 and rally to .6345 was of the same form but at one less degree of trend.  The downside is favored against .6400 in anticipation of a break below .6150.   

US Dollar / Japanese Yen
7-09-09Dailys-06

For the last number of weeks, I’ve written that “one can not force analysis upon choppy, unclear market structure.  Sometimes (this is that time), the correct decision is to do nothing and await clarity.”  The drop below 93.50 eliminates the bullish triangle count and leaves us with the bearish count in which the decline from 101.50 is a series of 1st and 2nd waves.  Former support in the 93.50-94.00 zone is now resistance.  Bears are favored against 97.00.

US Dollar / Canadian Dollar
7-09-09Dailys-07

The extent of the rally from 1.0782 almost assures that the entire decline from 1.3068 is complete.  Additionally, the rally from 1.0782 has unfolded as an impulse.  The count above (5 waves up that ended in a diagonal) along with RSI divergence favors a corrective decline prior to the next bull leg.  Resistance begins at 1.1417.  Interestingly, the short term count is a bit at odds with the more bearish counts for the EURUSD, AUDUSD, and NZDUSD (GBPUSD counts allows for some strength prior to next bear leg) so take a look at the CAD crosses. 

US Dollar / Swiss Franc

7-09-09Dailys-08

The USDCHF is still stuck in its 1.06-1.10 range.  We are left with competing counts, shown with labels above, until a break of the range.  If the trend has turned up, then 1.0630 should remain intact.

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.  Follow his intraday market commentary at DailyFX Forex Stream.
   
Please send comments about this report to jsaettele@dailyfx.com

 


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