Favor dollar weakness from here (allowing for small corrections) as wild pessimism towards foreign currencies (except the Yen) has run its course for now.
The rally from 1.3257 is an impulse, indicating that the trend is up towards 1.40-1.42. A B wave low may also be in place at today’s low (1.3456). A rally through 1.3686 warrants a bullish bias against 1.3456. Coming under there would not negate my bullish view; it would simply delay the larger advance.
The USDJPY is working towards measured support, which is at 102.93 (confluence of 100% extension of 97.88-101.24/99.51 and 50% of drop from 108.07). Look for a top and reversal near there.
Cable’s rally is unfolding as an impulse, but now is not the time to jump in. A push through 1.7446 would complete a third wave but give way to a 4th wave correction.
Given the patterns in the other USD pairs, I expect a larger corrective decline in the USDCHF that ends below 1.1125.
The USDCAD is nearing a short term support line. Dropping below there gives scope to the 50% and 61.8% of the rally from 1.0296; at 1.1179 and 1.0962. These levels also intersect with former reaction lows; support should be strong in near these levels.
With 5 waves potentially complete from above .82, a correction should reach the former 4th wave (defended by the 50%) at .70. The advance could accelerate in the coming days.
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
Short term resistance at .7138 should be put to the test soon. .7425-.7684 is the zone that I expect will be reached within 3 to 4 weeks. COT numbers favor AUDUSD strength.