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The dollar is breaking out to the upside once again.  The British Pound has dropped to a new low and the euro is probably not far behind.

Yesterday, I wrote that “with price staying below the underside of the triangle support line, it is possible that the triangle is complete at 1.2932.  If so, then the EURUSD will likely break to a new low (below 1.2326) by the end of November.”  The decline has accelerated, which increases confidence in the bearish bias.  Risk on shorts can be moved to 1.2636.     

The larger USDJPY trend is down so strength should be sold.  It is unclear though whether or not the rally from 90.86 is complete.  As long as price remains below 98.11, bearish potential is significant.  Evidence that favors a new low (although not necessarily before a push above 100.60) is the momentum extreme (RSI) at 90.86.  As I’ve mentioned many times before, price extremes (highs and lows) rarely correlate with momentum extremes.  Instead, price extremes occur with momentum divergence.  Support begins at 96.       

The GBPUSD decline has accelerated and dropped to a new low as expected.  Still confined to a steep channel, Cable is most likely still in an impulse.  The drop to a new low satisfies minimum expectations for wave 3 of C but additional downside is likely.  Monthly pivot support is at 1.4933.

The USDCHF continues to press against a short term upward sloping resistance line.  Divergence with RSI on the daily (and weekly) warns of a pullback.  However, the USDCHF is now holding above a line from late 2005, which suggests a healthy bull and additional gains.  Given the bearish EURUSD pattern, additional USDCHF strength seems the more likely scenario at this point.  Round number resistance is at 1.20 and the August 2007 high is just above 1.22.   

A wave 4 low may be in place for the USDCAD.  A line drawn off of highs from late 2007 / early 2008 has provided support ahead of 1.13, which is the 4th wave of one less degree as well as the 50% retracement of the rally from .9817 (low of wave 2).  If a low is in place, then price should remain above 1.16.

The AUDUSD dropped below .6538, negating the bullish bias that I had held.  There remains potential for a large recovery back to the mid .70s given the 5 wave drop from the top.  Until structure clears up, it is best to stand aside though.

The NZDUSD dropped below .5742 and in the process dropped below a head and shoulders neckline.  The implications from this pattern are bearish as long as price is below .59.

Jamie Saettele writes Forex Technicals: The Day Ahead, Monday-Thursday (published at 6 pm EST), Daily Technicals every weekday morning (9 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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