US Dollar Pulls Back but Turn Not Confirmed

Thu, 19 Feb 2009 09:25:47 -0500

By Jamie Saettele, Senior Currency Strategist

-EURUSD bounces from 1.25
-USDJPY nears January high
-GBPUSD short term resistance
-USDCHF still in diagonal
-USDCAD break favored as long as 1.2278 is intact


Euro / US Dollar


The EURUSD is searching for a multi-week bottom.  It is possible that the low is in place at 1.2510 if the triangle ended at 1.2947.  The advance from there is sharp and indicative of an impulse.  Short term resistance is in the 1.2800/83 zone.  Near term support is at 1.2650/90.

US Dollar / Japanese Yen


As suggested recently, it is likely that either a triangle or a flat (likely a flat at this point) is unfolding from the December low at 87.09.  I say this because both the advance from 87.09 and decline from 94.67 are in 3 waves.  The subwaves of triangles and flats are 3 wave affairs.  A break above 94.67 exposes the 38.2% of 110.71-87.09 at 95.45

British Pound / US Dollar


The rally from 1.35 is in just 3 waves (with the 2 up legs roughly equal…a common trait among corrections) and the decline from 1.4990 may be the next down leg in the long term bear.  There is the chance that 1.4609 is the top of either a b wave or small 2nd wave within a bear cycle from 1.4990.  A head and shoulders top is now visible, which favors bears as long as price is below 1.4609.  1.3775 is potential support (100% extension of 1.4990-1.4134/1.4609).  There is potential resistance at the current juncture from the 61.8% of the decline from 1.4609 (1.4431).  

US Dollar / Swiss Franc


The drop from 1.2303 is an impulse (5 waves), but the drop may be the end of a decline rather than the beginning (a C wave).  The decline would have completed an expanded flat at 1.0367.  This level serves as the secondary low in a longer term bull cycle from .9634.  The rally from 1.0367 is the beginning of the next long term bull leg.  Near term, this advance is nearing completion in an ending diagonal from 1.1312.  Watch the upper end of the diagonal line for resistance.  The line crosses roughly 1.1900 today and increases about 20 pips per day.   

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.  Price has rallied above the upper triangle line (although has pulled back today), which warns of a break above 1.2770 and then 1.3025.  The breakout scenario is favored as long as price is above 1.2278.

Australian Dollar / US Dollar


I am zooming out to the daily in order to highlight the long term bearish implications from the 5 wave drop and subsequent 3 wave rally (since July 2008).  The corrective rally from the October 2008 low ended right at the former 4th wave, which is typical of corrections.  The pattern since the October low can also be categorized as a head and shoulders continuation.  Coming under the February 2 low at .6245 would mark a break of the neckline and focus would then shift to the October low of .60.  Staying below .6649 favors bears.

New Zealand Dollar / US Dollar


The NZDUSD has also 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 .5322 favors bears.

Jamie Saettele writes Daily Technicals every weekday morning (930-10 am EST), COT analysis (published Monday mornings), and analysis of currency crosses throughout the week.  He is also the author of Sentiment in the Forex Market.

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