daily technicals

Forex Technicals: The Day Ahead, September 19

Thursday, 18 September 2008 21:54:14 GMT  |  Jamie Saettele, Senior Currency Strategist

The weight of evidence favors a continuation of dollar weakness into next week although short term dollar strength is a possibility.  Notably, there is a bearish breakout opportunity in the USDCAD.   

There are a number of various wave counts at the current juncture, which makes trading more risky than normal.  The rally from the low (1.3877) in 3 waves to this point.  However, the rally from 1.4071 has not yet reached the point where it would equal the rally from 1.3877 (which would be at 1.4689) and the rally from 1.3877 has yet to even reach the 38.2% of the decline from 1.6040 (which would be at 1.4667).  Therefore, we favor the count that treats the rally from 1.4071 as just the first leg in a larger C wave (or 3rd wave).  This count is valid as long as price is above 1.4071.  Potential support is at 1.4251 (and watch the potential short term trendline as well).  Finally, it is also possible that the rally from 1.3877 is the first leg of a more complex correction (flat or a triangle).  Subjectively, I favor strength with price remaining above 1.4071, but not before a dip into the 1.4250 area.   

We continue to favor the downside with price ideally remaining below 106.74.  This very short term count shows a possible 5 down from there followed by a 3 wave flat correction.  Trend indicators remain bearish as the 5,13,and 21 day moving averages are in ‘bearish order’, above price, and sloping down.      

Cable is in the exact same position as the EURUSD.  The possible wave count scenarios are the same.  In the case of the GBPUSD, the rally from 1.7729 would not equal the rally from 1.7443 until 1.8430.  Subjectively, I favor additional strength, but not until a drop below 1.8087.  Potential Fibonacci support is between 1.7940 and 1.8071.  

The USDCHF is the same as the EURUSD and GBPUSD, but in the inverse.  There is potential resistance at the confluence of former support and a short term resistance line near 1.1160.  We are leaning towards the bearish side as long as price is below 1.1255.  Be careful though as a larger triangle or flat may be unfolding.  In both cases, the USDCHF would probably exceed 1.1255 before reversing.

There is no change to the USDCAD analysis.  We are bearish against 1.0806 as the down-up sequence since 1.0827 is impulsive to the downside (5 waves) and corrective to the upside (3 waves).  We expect a break below 1.0566 soon and much lower prices going forward.  The USDCAD should remain below 1.0731.

We continue to favor the AUDUSD recovery scenario.  “The AUDUSD may have completed and ending diagonal at .7799.  If this count is correct, then the AUDUSD would probably return to .8750/.88 (we can’t be sure about how long it would take since we do not know what kind of corrective pattern would unfold).”  

A countertrend move back to the .7200 area or higher is probably underway.  This level intersects with the underside of a former support line that was broken in August.  Price should remain above .6553.

 

 

Jamie Saettele writes Forex Technicals: The Day Ahead, Monday-Thursday (published 6-7 pm EST), Daily Technicals  every weekday morning (9-10 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 him at jsaettele@dailyfx.com

 

 

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