daily technicals

We begin the week with the US dollar in a range.  The EURUSD, GBPUSD, AUDUSD, and NZDUSD have bounced from near the lower end of recent ranges in what may be the beginning of a larger recovery.  Still, patterns are mixed and there is no strong bias.

The euro / dollar could still drop below 1.2330 in order to complete a 5th wave within a 5 wave decline from 1.6040.  The bearish bias would be negated on a rally above 1.2932 (11/8 high).  Currently, there is resistance from the 11/13-14 and 19 highs in the 1.2818/61 zone.  Confidence in the bearish bias is low given the break above parallel Elliott resistance today.  

I maintain that the larger USDJPY trend is down so strength should be sold.  However, it remains unclear whether or not the rally from 90.86 is complete.  As long as price remains below 98.31 (and preferably below the resistance line from early October), bearish potential is significant.  A rally above 98.31 would suggest that a C wave rally will exceed 100.60.

The rally from 1.4554 is probably wave 4 of C (within an A-B-C decline from 2.1160).  There is potential resistance in the 1.5436-1.6008 zone (23.6%-38.2% of 1.8675-1.4554).    

Short term USDCHF structure is unclear but the long term wave count presented in the monthly forecast is bullish.  Higher highs and higher lows since the March low favors bulls as does the break above a line from 2002.  Potential support from the top side of a former resistance line (+ slope) comes in at 1.1908 today and increases about 8 pips per day.  

There is no change to the call for a push above 1.3025 prior to formation of a more important top.  This call remains as long as price is above 1.2082.  An unexpected drop below there would require a re-examination of the pattern.

There remains potential for a large recovery back to the mid .70s given the 5 wave drop from the top (waves a and b of an a-b-c correction would be close to complete).  Bulls may attempt to ‘pick’ this bottom given that the AUDUSD has held above the October low.

There is quintuple divergence with RSI on the daily NZDUSD chart, which warns of a reversal.  Friday’s inside day reinforces the potential reversal to the upside.  Staying above .5282 keeps the short term trend bullish. 

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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