daily technicals

Dollar Consolidation Beginning of a Reversal?

Friday, 17 October 2008 13:18:15 GMT  |  Jamie Saettele, Senior Currency Strategist

Consolidation since last Friday may mark the beginning of a larger reversal.  Pair such as the EURUSD, GBPUSD, AUDUSD, and NZDUSD could be building bullish bases.

This a-b-c-a-b-c count remains preferred.  The up, down sequence from 1.3258 are probably waves A and B of a flat.  If so, then wave C is underway now and likely ends near 1.40 (Fibonacci extension at 1.3862).

Remaining below 103.10 keeps the longer term bearish count intact in which the USDJPY will accelerate lower and drop below 95.72.  Be sure to view the long term USDJPY wave count, which you may find shocking (at how bearish I am longer term).

To review:  “The rally from 1.6775 is an impulse (5 waves) and a corrective decline from 1.7635 may be complete at 1.7375.”  The decline from 1.7635 did come close to the 61.8% of the advance from 1.6775, which is an area likely to produce a bottom.    

Nothing has changed regarding the USDCHF.  “5 waves up from 1.0686 and 3 waves down to former support is bullish for the USDCHF.  The alternate is still bullish, but the next leg up would not occur until a drop below 1.1125 that completes a larger correction from 1.1493.”  With the failed break above 1.1493 today, this may be a good time to take a stab at the short side.   

As long as the USDCAD is above the trendline from late September, bulls are in control.  Coming under the line would give scope to further weakness to complete an A-B-C decline from 1.2120.  I subjectively favor the larger decline scenario since patterns in the other pairs are USD bearish.

The AUDUSD is similar to the EURUSD in that the recovery off of the low and the decline from the recover high are both corrective (3 waves).  In such cases, a flat or triangle is unfolding.  In the case of a flat, the AUDUSD will exceed .7237.

The NZDUSD is in the exact same position as the AUDUSD.  The rally from the low is in 3 waves, and therefore corrective.  The decline from the recovery high is also corrective.  Expect a push through .6345 in order to complete the larger advance.

 

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.

 

Contact at jsaettele@dailyfx.com

 

 

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