bio2

The euro begins the week stronger but the larger trend remains bearish as long as price remains below 1.3085.  The commodity dollars look the most bullish against the US dollar.

If a triangle is unfolding, then wave E is in its latter stages and must end before 1.3085.  1.2933 is where wave c of E would equal wave a of E.  The triangle resistance line intersects 1.2975 today.  E waves tend to be sharp, just as this latest rally is. 

I wrote Friday that “the pair is approaching the October low near 90, which may provide support.  Bears that are late to the game may look to sell rallies into trendline resistance in the week(s) ahead if given the chance.”  The USDJPY began a bounce prior to 91 and is approaching the mentioned resistance line.  That line crosses 94.73 today and decreases about 20 pips per day.          

The GBPUSD surge through 1.50 may have completed an a-b-c advance (or the first part of a larger more complex correction) from 1.4465.  The high came close to former resistance at 1.5073, which is in the middle of the Fibo zone (50%-61.8%) at 1.50-1.5129.

Higher highs and higher lows since the March low favors bulls longer term.  Near term, the decline from the top side of the channel is impulsive and the rally from 1.1828 is corrective.  I had been “expecting weakness below 1.1828 in the next several weeks” but the EURUSD and GBPUSD bearish counts bring that bias into question.

The rally above 1.2993 negates the bearish bias that I had held.  Still, weakness may very well extend below 1.2120.  A drop below 1.2120 would potentially complete wave ii of 5 (within the 5 wave rally from .9055) and give way to a strong wave iii rally that exceeds 1.30.

I am always looking for a common theme such as risk aversion or dollar strength / weakness.  The EURUSD (and GBPUSD to a lesser extent) looks bearish to me but the AUDUSD looks bullish (wave c of a corrective advance that began in late October should exceed .70).  It is possible that the EURUSD breaks lower while the AUDUSD ranges (EURAUD bearish opportunity).  I am staying bullish, moving risk to .6287. 

Kiwi has rallied nicely following the warnings of a bottom seen on the daily with RSI.  However, until the NZDUSD rallies through trendline resistance (drawn off of the September and November highs), the chance of a breakdown remains.  If a larger bull has begun, then price should stay above .5199. 

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.

• free demo account
• forex courses
• open an account
• forex stream
• free webinars