Pressure is building up behind the US dollar leveraging the potential for short-term breakouts and momentum.
The most bearish count places the EURUSD in a 3rd of a 3rd wave from 1.4179. 1.3820 is potential short term resistance. Oversold RSI on multiple time frames warns of a larger pullback, so confidence in this very bearish count is low. Please keep in mind that the triangle and flat counts are still valid at the current juncture.
I favor the downside as long as price is below the trendline from the 110.71 top. The 200 day SMA is sloping down (barely) and right at current price. Whichever way this break goes; it should be violent.
Cable has yet to break its low. “The continued decline in Cable makes the decline from 1.8675 in 7 waves, which is a double zigzag correction. The GBPUSD is in the exact same position as the EURUSD; a flat or triangle is probably underway. Nothing is ever certain, but the weight of evidence suggests to me that a larger correction of the decline from mid July is more likely than a bearish break here. Evidence includes RSI (on this chart), and COT data.”
The flat and triangle counts remain preferred. One warning that the USD may begin to weaken in general is the fact that the EURUSD broke its recent low while the GBPUSD and USDCHF have failed to break their respective price extremes. This is a potential divergence.
Hesitant bulls have pushed USDCAD right up to notable resistance at 1.0800/25, but the momentum for a breakout hasn’t fully developed. The indecision at this level suggests that regardless of the whether the market falls to a breakout or retracement, there is the potential for high volatility and follow through.
The decline from .8524 has taken the form of an impulse, signaling that the larger trend is down. Expect a rally (that should be corrective…the form of the rally will confirm or negate the bearish bias against .8524), and look for resistance beginning at .8101.
Kiwi has been the quiet one of the bunch….there is no change to the count. “The advance from .6435 is in 3 waves so a the long term decline may be back underway. It is also possible that a larger correction is underway that will end closer to .72. Action over the next several days should help to clear things up.”
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